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 20.5RQ
To determine
Concept Introduction:
Auditor legal liability: 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 difference among the four standards that have evolved for defining auditor’s liability for ordinary negligence to third parties under common law
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Students have asked these similar questions
Generally, the auditor could be legally liable under?
Select one:
a. contract law but not under the tort of negligence to third parties
b. the tort of negligence to the client and contract law
c. the tort of negligence but not contract law to the client
d. contract law to third parties and to the client
Distinguish between the legal concepts of actually foreseen third-party users and reasonably foreseeable third-party users. How does each concept establish a basis for an auditor’s legal liability to third parties?
3.An important development in the area of breach of contract by an auditor is contributory negligence.Required:Define contributory negligence. Discuss the concept of contributory negligence as it applies to auditing using the example of the AWA case.
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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Similar questions
- Which common law approach leads to increased CPA liability to "foreseeable" third parties for ordinary negligence?arrow_forwardExplain the auditor legal liability, this includes what law that procure such liability?arrow_forwardWhat types of actions may an auditor be liable to a client under common law? Why would the clients prefer to sue the auditor for tort action rather than a breach of contract?arrow_forward
- Auditors 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_forwardWhat elements does a plaintiff have to prove to be successful in a case against a negligent auditor?arrow_forwardWhich of the following cases provides auditors the broadest exposure for liability to thirdparties for ordinary negligence under common law?a. Credit Alliance v. Arthur Andersen.b. Fleet National Bank v. Gloucester Co.c. Rosenblum Inc. v. Adler.d. Ultramares.arrow_forward
- Briefly comment on the following questions or statements. a) Describe approaches to minimizing legal liability. b) Describe concept of 'duty of care'. c) Describe concept 'contributory negligence'arrow_forwardWhat defenses are available to auditors against suits brought by clients under common law? Against suits brought by third parties under common law?arrow_forwardHow does the prudent person concept affect the liability of the auditor?arrow_forward
- Briefly comment on the following question or statement. (a) Describe approaches to minimizing legal liability. (b) Describe concept of ‘duty of care’. (c) Describe concept ‘contributory negligence’.arrow_forwardFor what type of actions can clients bring suit against auditors under common law? What must clientsprove prior to bringing suit in each case?arrow_forwardIs the auditor’s liability affected if the third party was unknownrather than known? Explainarrow_forward
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