Question

You work for a public accounting firm. The audit committee for one of your best audit clients wants you to investigate the CFO for possible corruption fraud. You have been asked by your client to explain the impact of the investigation on the ability of your firm to continue to serve as the company's auditor. What is your response?

Answer 1

While it is the primary responsibility of the management to detect fraud in the organisation. But management may some take helps from internal or external auditors of the Company.

Being our audit client it is implied that it is also our responsibility as an engagement team of public accounting firm to detect and report fraud in their audit report. Hence detection of fraud and applying sufficient audit procedures is well in our scope of services. Hence we can accept the  engagement. And as an independent firm, perform adequate audit procedures to detect and report to the audit committee members.

Overall Investigation is well within the scope of services for external auditors except few audit clients who are may SEC listed or public interest entities. In that cases external auditor should clearly see scope of services for non-audit services. Otherwise, generally external auditors can provide above services.