审计学一种整合方法15版英文教辅资源AEB15_SM_C05_v.pdf
《审计学一种整合方法15版英文教辅资源AEB15_SM_C05_v.pdf》由会员分享,可在线阅读,更多相关《审计学一种整合方法15版英文教辅资源AEB15_SM_C05_v.pdf(14页珍藏版)》请在得力文库 - 分享文档赚钱的网站上搜索。
1、5-1 Chapter 5 Legal Liability Review Questions 5-1 Several factors that have affected the increased number of lawsuits against CPAs are:1.The growing awareness of the responsibilities of public accountants on the part of users of financial statements.2.An increased consciousness on the part of the S
2、EC regarding its responsibility for protecting investors interests.3.The greater complexities of auditing and accounting due to the increasing size of businesses,the globalization of business,and the intricacies of business operations.4.Societys increasing acceptance of lawsuits.5.Large civil court
3、judgments against CPA firms,which have encouraged attorneys to provide legal services on a contingent fee basis.6.The willingness of many CPA firms to settle their legal problems out of court.7.The difficulty courts have in understanding and interpreting technical accounting and auditing matters.5-2
4、 The most important positive effects are the increased quality control by CPA firms that is likely to result from actual and potential lawsuits and the ability of injured parties to receive remuneration for their damages.Negative effects are the energy required to defend groundless cases and the har
5、mful impact on the publics image of the profession.Legal liability may also increase the cost of audits to society,by causing CPA firms to increase the evidence accumulated.5-3 Business failure is the risk that a business will fail financially and,as a result,will be unable to pay its financial obli
6、gations.Audit risk is the risk that the auditor will conclude that the financial statements are fairly stated and an unqualified opinion can therefore be issued when,in fact,they are materially misstated.When there has been a business failure,but not an audit failure,it is common for statement users
7、 to claim there was an audit failure,even if the most recently issued audited financial statements were fairly stated.Many auditors evaluate the potential for business failure in an engagement in determining the appropriate audit risk.5-4 The prudent person concept states that a person is responsibl
8、e for conducting a job in good faith and with integrity,but is not infallible.Therefore,the auditor is expected to conduct an audit using due care,but does not claim to be a guarantor or insurer of financial statements.5-2 5-5 The difference between fraud and constructive fraud is that in fraud the
9、wrongdoer intends to deceive another party whereas in constructive fraud there is a lack of intent to deceive or defraud.Constructive fraud is highly negligent performance.5-6 Many CPA firms willingly settle lawsuits out of court in an attempt to minimize legal costs and avoid adverse publicity.This
10、 has a negative effect on the profession when a CPA firm agrees to settlements even though it believes that the firm is not liable to the plaintiffs.This encourages others to sue CPA firms where they probably would not to such an extent if the firms had the reputation of contesting the litigation.Th
11、erefore,out-of-court settlements encourage more lawsuits and,in essence,increase the auditors liability because many firms will pay even though they do not believe they are liable.5-7 An auditors best defense for failure to detect a fraud is an audit properly conducted in accordance with auditing st
12、andards.The Principles in auditing standards(see Chapter 2)note that the objective of an audit is to obtain reasonable assurance that the financial statements are free of material misstatement,whether due to fraud or error.Thus,auditors design audit procedures to provide reasonable assurance that ma
13、terial misstatements due to fraud are detected.However,because reasonable assurance is not absolute assurance,a properly designed and executed audit may not detect a material misstatement due to fraud.5-8 Contributory negligence used in legal liability of auditors is a defense used by the auditor wh
14、en he or she claims the client or user also had a responsibility in the legal case.An example is the claim by the auditor that management knew of the potential for fraud because of deficiencies in internal control,but refused to correct them.The auditor thereby claims that the client contributed to
15、the fraud by not correcting material weaknesses in internal control.5-9 An engagement letter from the auditor to the client specifies the responsibilities of both parties and states such matters as fee arrangements and deadlines for completion.The auditor may also use this as an opportunity to infor
16、m the client that the responsibility for the prevention of fraud is that of the client.A well-written engagement letter can be useful evidence in the case of a lawsuit,given that the letter spells out the terms of the engagement agreed to by both parties.Without an engagement letter,the terms of the
17、 engagement are easily disputed.5-10 Liability to clients under common law has remained relatively unchanged for many years.If a CPA firm breaches an implied or expressed contract with a client,there is a legal responsibility to pay damages.Traditionally the distinction between privity of contract w
18、ith clients and lack of privity of contract with third parties was essential in common law.The lack of privity of contract with third parties meant that third parties would have no rights with respect to auditors except in the case of gross negligence.5-3 5-10(continued)That precedent was establishe
19、d by the Ultramares case.In recent years some courts have interpreted Ultramares more broadly to allow recovery by third parties if those third parties were known and recognized to be relying upon the work of the professional at the time the professional performed the services(foreseen users).Still
20、others have rejected the Ultramares doctrine entirely and have held the CPA liable to anyone who relies on the CPAs work,if that work is performed negligently.The liability to third parties under common law continues in a state of uncertainty.In some jurisdictions,the precedence of Ultramares is sti
21、ll recognized,whereas in others there is no significant distinction between liability to third parties and to clients for negligence.5-11 In recent years,the auditors liability to a third party has become affected by whether the party is known or unknown.Now a known third party,under common law,usua
22、lly has the same rights as the party that is privy to the contract.An unknown third party usually has fewer rights.The approach followed in most states is the Restatement of Torts approach to the foreseen users concept.Under the Restatement of Torts approach,foreseen users must be members of a reaso
23、nably limited and identifiable group of users that have relied on the CPAs work,even though those persons were not specifically known to the CPA at the time the work was done.5-12 The differences between the auditors liability under the securities acts of 1933 and 1934 are because the 1933 act impos
24、es a heavier burden on the auditor.Third party rights as presented in the 1933 act are:1.Any third party who purchases securities described in the registration statement may sue the auditor.2.Third party users do not have the burden of proof that they relied on the financial statements or that the a
25、uditor was negligent or fraudulent in doing the audit.They must only prove that the financial statements were misleading or not fairly stated.In conjunction with these third-party rights,the auditor has a greater burden in that he or she must demonstrate that:1.The statements were not materially mis
- 配套讲稿:
如PPT文件的首页显示word图标,表示该PPT已包含配套word讲稿。双击word图标可打开word文档。
- 特殊限制:
部分文档作品中含有的国旗、国徽等图片,仅作为作品整体效果示例展示,禁止商用。设计者仅对作品中独创性部分享有著作权。
- 关 键 词:
- 审计学 一种 整合 方法 15 英文 教辅 资源 AEB15_SM_C05_v
限制150内