Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Question
Chapter 4, Problem 8RQSC
To determine
Legal Tests
Legal tests are various types of test which are commonly applied the method of evaluation used to resolve the matter of jurisprudence.
To explain: The tests used by courts to determine third party users who can file suit against an auditor for negligence and describe the parties that are defined in these tests.
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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?
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 law
What are the concepts of legal responsibility applicable to the accountant in his audit functions and other related services? and mention five (5) recommendations so that the auditor can prevent or protect himself from his legal responsibility.
Chapter 4 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
Ch. 4 - Prob. 1CYBKCh. 4 - Prob. 2CYBKCh. 4 - Prob. 3CYBKCh. 4 - Prob. 4CYBKCh. 4 - Prob. 5CYBKCh. 4 - Prob. 6CYBKCh. 4 - Prob. 7CYBKCh. 4 - Prob. 8CYBKCh. 4 - Prob. 9CYBKCh. 4 - Prob. 10CYBK
Ch. 4 - Prob. 11CYBKCh. 4 - Prob. 12CYBKCh. 4 - Prob. 1RQSCCh. 4 - Prob. 2RQSCCh. 4 - Prob. 3RQSCCh. 4 - Prob. 4RQSCCh. 4 - Prob. 5RQSCCh. 4 - Prob. 6RQSCCh. 4 - Refer to the Focus on Fraud feature “Moss Adams...Ch. 4 - Prob. 8RQSCCh. 4 - Prob. 9RQSCCh. 4 - Prob. 10RQSCCh. 4 - Prob. 11RQSCCh. 4 - Prob. 12RQSCCh. 4 - Prob. 13RQSCCh. 4 - Prob. 14RQSCCh. 4 - Prob. 15RQSCCh. 4 - Prob. 16RQSCCh. 4 - Prob. 17RQSCCh. 4 - Prob. 18RQSCCh. 4 - Prob. 19RQSCCh. 4 - Prob. 20RQSCCh. 4 - Prob. 21RQSCCh. 4 - Able Corporation decided to make a public offering...Ch. 4 - KPMG (LO 1, 2, 3) KPMG LLP served as the external...Ch. 4 - ToshIba, EY (LO 1, 2, 3) In 2015, the business...
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Similar questions
- Which 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_forwardHow does the auditor’s opinion differ between scope limitationscaused by client restrictions and limitations resulting from conditions beyond the client’scontrol? Under which of these two will the auditor be most likely to issue a disclaimer ofopinion? Explain.arrow_forwardIdentify two examples of acts or behavior by CPAs that would beconsidered discreditable to the profession under Rule 501.arrow_forward
- Is it OK to give the client copies of the auditor's previous documents? If so, what should the auditors look for before giving the documentation to the client? At least three things.arrow_forwardDirect evidence consists of a supervisor's opinion as to the plaintiff's mental state at the time of the crime. True or Falsearrow_forwardThe statements that follow are with regard to evidence that is sufficient and appropriate. As a future auditor, you are required to indicate if you agree with each statement and provide reasons for your decisions: a. When the auditor is making a decision on whether or not sufficient and appropriate evidence has been obtained they will first need to make considerations regarding the sufficiency of the evidence gathered.arrow_forward
- Describe the action that an auditor should take if an attorneyrefuses to provide information that is within the attorney’s jurisdiction and may directlyaffect the fair presentation of the financial statements.arrow_forwardBesides the search for contingent liabilities and the review for subsequent events, the auditor has four important final evidence accumulation responsibilities, all of which are required by current professional auditing standards. Discuss each of these four responsibilities.arrow_forwardAn oral or written statement made by an out-of-court declarant that is offered in court by a witness other than the declarant and that is offered in evidence to prove the truth of a matter asserted is referred as: A. Relevant evidence. B. Admission statement. C. Former testimony under oath. D. Hearsay.arrow_forward
- AICPA independence requirements suggest that a CPA should evaluate whether a particular threat to independence would lead a reasonable person, aware of all the relevant facts, to conclude that: a A questioning mind reveals doubt as to independence. b An unacceptable risk of non-independence exists. c The accountant is definitely not independent. d There is substantial cause for a legal finding of non-independence.arrow_forwardWhat are the most often used audit processes for verifying the existence of a claim?arrow_forwardThe primary reason an auditor requests that letters of inquiry be sent to a client's attorney is to provide the auditor with A description and evaluation of litigation, claims, and assessments that existed at the balance sheet date The attorneys' opinions of the client's historical experiences in recent similar litigation, The probable outcome of asserted claims and pending or threatened litigations Corroboration of the information furnished by management about litigation, claims, and assessmentsarrow_forward
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