Post, CPA, accepted an engagement to audit the financial statements of General Company, a new client. General is a publicly held retailing entity that recently replaced its operating management. In the course of applying auditing procedures, Post discovered that General's financial statements may be materially misstated due to the existence of fraud.

Required:

a. Describe Post's responsibilities regarding the circumstance described.

b. Describe Post's responsibilities to report on General's financial statements
 and other communications if Post is precluded from applying necessary procedures in searching for fraud.

c. Describe Post's responsibilities to report on General's financial statements and other communications if Post concludes that General's financial statements are materially affected by fraud.

a.       If Post discovers that Generals financial statements may be materially misstated due to the existence of frauds, Post should consider the implications for other aspects of the audit and discuss the matter and approach to further investigation with an appropriate level of management that is at least one level above those involved with the frauds. Post should also attempt to obtain sufficient competent evidential matter to determine whether, in fact, material frauds exist and, if so, their effect Post may suggest that General consult with its legal counsel on matters concerning questions of law. 

b.       If Post is precluded from applying necessary procedures, Post should disclaim or qualify an opinion on the financial statements and communicate these findings to Generals audit committee or its board of directors. 

c.        If Post concludes that Generals financial statements are materially affected by frauds, Post should insist that the financial statements be revised and, if they are not, express a qualified or an adverse opinion on the financial statements, disclosing all the substantive reasons for such an opinion. Additionally, Post should adequately inform General's audit committee or its board of directors about the frauds.