94 PART 2 95 96 Please give your answer using your own opinion. E 97 98 99 Paul Sherman, CPA, accepted an engagement to audit the financial statements of Holland Company, a new client. Holland Company is a publicly held retailing entity that recently replaced its operating management. In the course of applying auditing procedures, Paul Sherman discovered that Holland Company's financial statements may be materially misstated due to the existence of irregularities. 100 101 102 103 105 106 107 100 109 110 111 112 113 114 Required: 1. Describe Paul Sherman's responsibilities on the circumstances described above. 2. Describe Paul Sherman's responsibilities for reporting for Holland Company's financial statements and other communications if Paul Sherman is precluded from applying necessary procedures in searching for irregularities. 3. Describe Paul Sherman's responsibilities for reporting for Holland Company's financial statements and other communications if Paul Sherman concludes that Holland Company's financial statements are materially affected by irregularities. 4. Describe the circumstances in which Paul Sherman may have a duty to disclose irregularities to third parties outside Holland Company's management and its audit committee. 115 116 94 PART 2 95 96 Please give your answer using your own opinion. E 97 98 99 Paul Sherman, CPA, accepted an engagement to audit the financial statements of Holland Company, a new client. Holland Company is a publicly held retailing entity that recently replaced its operating management. In the course of applying auditing procedures, Paul Sherman discovered that Holland Company's financial statements may be materially misstated due to the existence of irregularities. 100 101 102 103 105 106 107 100 109 110 111 112 113 114 Required: 1. Describe Paul Sherman's responsibilities on the circumstances described above. 2. Describe Paul Sherman's responsibilities for reporting for Holland Company's financial statements and other communications if Paul Sherman is precluded from applying necessary procedures in searching for irregularities. 3. Describe Paul Sherman's responsibilities for reporting for Holland Company's financial statements and other communications if Paul Sherman concludes that Holland Company's financial statements are materially affected by irregularities. 4. Describe the circumstances in which Paul Sherman may have a duty to disclose irregularities to third parties outside Holland Company's management and its audit committee. 115 116