1. Read the following scenario and answer the question in 5-10 sentences.

You work for an accounting firm in a mid-sized town. Your firm has had many clients for several years. You are working with a manager from your firm to complete an audit for one of your clients. During the audit, you notice that the income and expenses this year were much higher than other years, even though the economy was not as good. You also notice that there are a couple of accounts that have had very low levels of activity in the past but are very active this year, with high volumes of transactions. Your manager asks the company leadership about it and they respond that they just started using some accounts a little differently in order to keep better track of the money. Your manager accepts their answer since they have been long term clients and have always been trustworthy. The manager issues documentation that the client's accounting records were accurate and reliable. It turns out that the client was overcharging its customers and was putting the extra amount in the "new" accounts. That money then was being used to fund personal expenses for the owners. Discuss whether your firm might be liable for any violations of duty or law.