Auditing Unit 2
Auditing Unit 2
Unit 2
Question Requiring Analysis 3-31
Be sure to check out the requirements of the Private Securities Reform Act of
1995 to see how each scenario should be handled.
Part A: If management takes appropriate action to remedy the illegal actions
Barber CPA should report based on the situation. Rule 301 stresses the
confidential nature of information obtained by CPAs from their clients.
(Whittington, 2012) But in instance of illegal activities he should have duty if
the situation has a material effect on the financial statements. The private
securities and Reform act of 1995 includes a requirement for fraud
reporting, or whistleblowing, by the auditors. The requirements of this law
apply when the client has committed an illegal act and (a) it has a material
effect on the financial statements. (Whittington, 2012) Barber should still
take measures to inform management and board of directors of the findings
if findings are not material.
Problem 3-43
Rule
Number
102
201
203
301
References
Whittington, R. (2012). Principles of Auditing & Other Assurance Services, 18th
edition. New York, NY: McGraw-Hill Irwin.