My responsibilities as the auditor would be affected by the knowledge of the CFO’s act. As an auditor, I have a duty to inform the financial statement users about the illegal act of CFO, making a false statement under the penalty of perjury in this case, which hurts integrity and reliability of the company’s management.
I should contact the audit committee about the CFO’s act for two reasons as follows:
(1) According to Auditing Standard No. 16 (PCAOB rules) Appendix B, certain matters including an illegal act (AU sec. 317.17) are required to be communicated to a company’s audit committee.
(2) The missing of Section 2 (I-9) of the CFO indicates a problem in internal control.
a. No. The illegal act does not increase the potential for fraud in the financial statements. In this case, the act itself does not involve business related transactions that could affect revenue or earnings of financial statements.
b. The fact that Section 2 is missing provides a ground for internal control deficiency in HR. Auditor should perform the assessment to provide reasonable assurance for internal control.
Dear Ms. Doe,
I am writing to report the illegal act of the CFO of Bell Manufacturing, and provide my recommendation regarding this issue.
The description of the illegal act:
During a private conversation with Jay Hoffman, the CFO of Bell Manufacturing, Hoffman admitted that he worked in the company as an illegal immigrant status despite his current status as a US citizen. The review of Form I-9 signed by Hoffman indicates his status as the US citizen, and this leads to making a false statement under the penalty of perjury.
The circumstance of its occurrence:
Hoffman’s status is deemed to be illegal immigrant at that time. The company never completed Section 2 of Hoffman’s Form I-9 which examines the evidence of employee ID and employment eligibility.
The effect on the financial statement:
Since the illegal act does not involve business transaction, the