Ultramares Vs Touche Case Summary

Material misstatement shall be treated and assessed by the auditors as significant risks. And the auditor shall gather an understanding of the entity’s

The auditor¡¦s responsibility is to the client and not the third parties the client plans to distribute the financial statements to. The auditor does however consider the third parties when completing the audit. There is no direct responsibility to the third parties.

CAS 300 requires auditors to their audit using a risk based model where the nature, timing and extent of audit procedures are based on the assessed risk of material misstatement. Pickett (2006) argues that for audits to be effective and efficient, much of the audit effort should be focused on areas that are considered to pose the highest audit risk. Additional audit procedures should be linked to individual audit assertions whereas other audit procedures need to be performed as and when needed. Thus, for an audit plan to be put in place, it is necessary for an auditor to come up with a risk profile of the client comprising an understanding of the business operating by the audit client, assess business risk and also perform its preliminary analytical review.

This case established that an auditor could be sued by a primary beneficiary for damages from negligence. A primary beneficiary is a party that has a direct benefit from the audit. Non-privity parties could also sue for gross negligence. This increased the auditor’s legal exposure to third parties. The SEC of 1934 reflected these changes and many others; one significant change was that auditor’s had a much higher litigation risk due to their new responsibility to third parties.

This research paper analyzes the degree of an auditor's liability to clients and third parties under applicable law.

12-9: According to AU 240, auditors should exercise professional skepticism during the audit and discuss the risks of material misstatement due to fraud (Wells, 2013, p. 330). The auditor should also discuss the implications of the audit with the appropriate level of management. Finally, the auditor should obtain sufficient evidence to determine if material fraud exists and what the impact on the actual financial statements is (Wells, 2013, pp.

Since auditors are not responsible for the actual financial statements, only the authenticity of them, as you stated, the more

The auditor is expected to give a qualified opinion in relation to the financial statements of the company. They are supposed to disclose any fraud and who the individuals are committing the fraud. Ernst & Young specific warnings about fraud in the Health Source and failed to bring it to light they was professional negligence on their

Under the Security Act of 1933 and 1944, any individual that willfully filed untrue statements should be penalized. Auditors acting behalf of the public’s interest should make sure the company’s financial statements are not misleading. All the testing and auditing procedures are to verify that the number on the financial statements, and audit testing should be supported by substantial evidence. When auditors took their responsibility for and but did not show their competence for work, they should be heavily fined because their carelessness resulted the investors making a bad decision. Furthermore, if the auditors did not take their responsibility and showed no work to support their opinions should be charged as gross negligence with a heavy fine and license taken away. If it comes down to fraud, auditors should definitely face criminal charges along with their auditing company, and their license should be taken away

My three-years of studying at HKU afforded me with the knowledge of financial accounting and now, as a senior, I am able to consolidate complex financial statements. However, after spending an internship working with auditors, I begin to realize the many potential pitfalls inherent in the auditor/client relationship. Facing a huge amount of pressure from their clients, who, of course, are paying the bills, auditors who should be independent commonly bend the rules to curry favor with clients and

The audit risk model has provided a conceptual framework for auditing practice for more than 40 years. Despite practical difficulties in implementation and criticisms of its theoretical foundation, the model has been fairly effective in helping auditors analyze risks and use that analysis to determine the nature, timing, and extent of audit procedures (especially substantive procedures) in audits of financial statements. The audit risk model provides a conceptual framework for the risk assessment standards.

Accountants are considered to be the only person that knows you better than you know yourself, which is why the most important factor when considering an accountant is trust. They are responsible for confidentiality of financial information; record keeping by daily posting; and consulting input on market trends, real estate purchases and investments. Due to these responsibilities, accountants are obligated to act in the interest of the party and also respect the Code of Ethical Principles and Standards. In the case of Rihanna (Plaintiff) vs Berdon LLP (Defendant), Rihanna accuses her accountants of very strong claims. These claims include Rihanna losing millions due to mismanagement of her cash flow, expense, and touring income; mishandle of her taxes and failure of applying for tax returns; and lastly omission of discouragement of buying multi-million dollar house when experiencing financial problems.

B) I think the auditors should have equal responsibility for detecting material misstatements due to error and fraud. It’s their job to make sure the financial statements are as accurate as possible. Although it may be hard to check all the information from a company it’s the responsibility of the auditor to sign off that everything is in check.

Looking at the facts given within the case of Easy Finance Limited (EFL) against King& Queen there is a possibility that King& Queen could be liable. An Auditor is expected to exercise the “reasonable care and skill” that is expected of a professional which comes from the legal president established from the judgment by Moffit J in Pacific Acceptance Corporation v Forsyth and Others (1970) 90 (NSW) 29. An auditor can be liable if they are proven to be negligent or have committed fraud (Gay& Smitten, 2010, p.152).

Since reliable financial information is essential for investors and other stakeholders to take adequate decisions, this reliability must be backed by independent review performed by independent and certified auditing firms, which are supposed to verify and certify financial statements issued by a company’s management. If the auditor is not competent and independent from management, the audit of the financial statements loses its credibility (Schelker, 2013, p.295). According to Impastato (2003), because of audit failures, accountants are to blame for investors losing billions of dollars in earnings in addition to market capitalization (as cited in Grubbs & Ethridge 2007).