You have identified a suspected fraud involving the company's controller. What must you do in response to this discovery? How might this discovery affect your report on internal control when auditing a public company?

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Part 1

You have identified a suspected fraud involving the company's controller. What must you do in response to this discovery?

A.

Auditing standards requires the auditor to discuss the matter and audit approach for further investigation with an appropriate level of management that is at least one level above those involved, and with senior management and the audit committee, even if the matter might be considered inconsequential.

B.

Auditing standards requires the auditor to obtain additional evidence to determine whether material fraud has occurred, and requires the auditor to consider the implications for other aspects of the audit.

C.

Auditing standards requires the auditor to include a footnote disclosure in the financial statements that suspected fraud involving the company's controller was uncovered during the audit process, and what the outcome was at the end of the audit, and name who was at fault.

D.

Both A and B are correct.