Answered: What does a third-party user of…

What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence? Explain each item with an example

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter4: Professional Liability, Auditor Judgment Frameworks, And Professional Responsibilities

Section: Chapter Questions

Problem 63RSCQ

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

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What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence? Explain each item with an example

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Similar questions

What does a third-party user of financial statements have to prove under common law in a suit against an auditor for the auditor's negligence?
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Give an explanation of the legal foundation for suing a CPA. What defenses does the auditor have to counter such accusations? What is the relationship between these defenses and adherence to the accounting profession's ethical standards?
Under common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements? A. The CPA is liable only to third parties in privity of contract with the CPA B. The CPA is liable only to known users of the financial statements C. The CPA probably is liable to any person who suffered a loss as a result of the fraud D. The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion
What is the auditors responsibility regarding the noncompliance with laws by a client?
4) Explain if, and why an accountant will be held liable to: its client, to 3rd party intended users of the financial statements and audits it prepares for its client, and to reasonably foreseeable users of the work, it prepared for its client. ∙ Be sure to identify who reasonably foreseeable users would be and why the accountant is responsible to them in the absence of privity.