A client, without consulting its CPA, has changed its accounting so that it is not in accordance with generally accepted accounting principles. During the regular audit engagement the CPA discovers that the statements based on the accounts are so grossly misleading that they might be considered fraudulent. 

1. Discuss the specific action to be taken by the CPA. 

2. In this situation what obligation does the CPA have to outsiders if he or she is replaced? Discuss briefly.

3. In this situation what obligation does the CPA have to a new auditor if he or she is replaced? Discuss briefly.