Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Question
Chapter 20, Problem 20.13RQ
To determine
Concept Introduction:Auditor legal liability includes the legal activities against or for the auditors. The auditor is in the contractual relationship with theclient and if he does not perform according to the terms of the contract, the client can claim against the auditor.As per the common law, the auditor is liable for the negligence, breach of contract, and fraud procedure claimed by the clients.
To describe: The actions that can result in an auditor being held criminally liable under statues and regulation.
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What is the auditor's role when a client fails to follow the law?
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Chapter 20 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 20 - Prob. 20.1RQCh. 20 - Prob. 20.2RQCh. 20 - Prob. 20.3RQCh. 20 - Prob. 20.4RQCh. 20 - Prob. 20.5RQCh. 20 - Prob. 20.6RQCh. 20 - Prob. 20.7RQCh. 20 - Prob. 20.8RQCh. 20 - Prob. 20.9RQCh. 20 - Prob. 20.10RQ
Ch. 20 - Prob. 20.11RQCh. 20 - Prob. 20.12RQCh. 20 - Prob. 20.13RQCh. 20 - Prob. 20.14MCQCh. 20 - Prob. 20.15MCQCh. 20 - Prob. 20.16MCQCh. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Prob. 20.19MCQCh. 20 - Prob. 20.20MCQCh. 20 - Prob. 20.21MCQCh. 20 - Prob. 20.22MCQCh. 20 - Prob. 20.23MCQCh. 20 - Prob. 20.24MCQCh. 20 - Prob. 20.25MCQCh. 20 - Prob. 20.26PCh. 20 - Prob. 20.27PCh. 20 - Prob. 20.28PCh. 20 - Prob. 20.29P
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- What are some civil and criminal consequences if CPAs/auditors fail to follow professional standards?arrow_forwardWhat are the consequences for a CPA who commits an Act Discreditable?arrow_forwardWhat are the auditor’s responsibilities under the Corporations Act toreport breaches of the Act? Who does the auditor report to?arrow_forward
- What are some of the advantages and disadvantages of permitting auditors to provide nonaudit services (such as tax services) to clients?arrow_forwardWhat 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 examplearrow_forwardMay an action arising from fraud be waived? explainarrow_forward
- Which of the following is NOT a possible legal risk that can arise because of a fraud investigation conducted in an improper manner? A. Forcible entry and detainer. B. Invasion of privacy. C. Defamation. D. Malicious prosecution.arrow_forwardAuditors may be held liable to both their clients and third parties under common law. a. What must a client prove to recover its losses from the auditors under common law? b. In a court that adheres to the precedent set by the Ultramares v. Touche case, what must an ordinary third party prove to recover losses from the auditors under common lawarrow_forwardUnder what circumstances can a CPA be paid on a commission basis? Why do you think the regulation impose these restrictions?arrow_forward
- What is the auditor's role in reporting violations of the Corporations Act under the Corporations Act? Who does the auditor have to answer to?arrow_forwardDo you think that the provision of nonaudit services for a client with a failed audit is evidence of negligence? Explain.arrow_forwardDistinguish between an auditor’s responsibilities to detect and report errors, illegal acts, and fraud. What role does materiality have in determining the proper reporting and disclosure of such events?arrow_forward
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