AUDITING-TEXT (LOOSELEAF)
11th Edition
ISBN: 9781337619462
Author: JOHNSTONE
Publisher: CENGAGE L
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Chapter 4, Problem 10CYBK
To determine
Introduction: The independent examination of the financial statements of an entity is termed as an audit. In an audit engagement, the auditor provides an opinion on the true and fair view of the financial statements. An auditor can be held liable under common law, contract law, and statutory law.
To identify: Whether the given statement is true or false.
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Chapter 4 Solutions
AUDITING-TEXT (LOOSELEAF)
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
- 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_forward2. A client has departed from GAAP for what you, the auditor, considers to be justifiable. The financial statements would have been misleading if the client had not departed from GAAP. Circumstance: Type of Opinion:arrow_forwardWhy are auditors not liable for defamation in connection with his/her audit?arrow_forward
- The Commissioner can force a taxpayer to produce his/its accounting records if the taxpayer refuses to provide the same during audit. A. True B. Falsearrow_forwardIn a common law action against an accountant, lack of privity is a viable defense ifthe plaintiff(1) is the client’s creditor who sues the accountant for negligence.(2) can prove the presence of gross negligence that amounts to a reckless disregardfor the truth.(3) is the accountant’s client.(4) bases the action upon fraud.arrow_forwardUnder 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 opinionarrow_forward
- Individuals who believe they relied on misstated financial statements to make a decision andhave suffered losses as a result will issue an action known as aa. Breach of contract.b. Tort.c. Securities litigation.d. Constructive fraud.arrow_forwardWhat is the auditor's role when a client fails to follow the law?arrow_forwardAuditor’s failure to exercise sufficient care and skill in carrying out their audit might lead to legal action by those who claim to rely on the work of the auditor (Che-Ahmad et. Al., 2018). Discuss THREE (3) safeguards by auditors that could help minimize the risk of legal liability.arrow_forward
- Audit evidence obtained directly by the auditor will not be reliable if Select one: a. it is provided by the client's attorney b. the auditor lacks the competence to evaluate the evidence c. it is impossible for the auditor to obtain additional corroboratory evidence d. the client denies its veracityarrow_forwardA number of cases have considered the auditor’s liability in relation to persons other than the immediate client. Even so, the AWA case established that: Select one: a. Duty of care and skill means following the accounting standards b.auditors have a contractual duty to oversee and review the work of inexperienced audit staff c.Auditors are only liable for the proportion of damages attributable to their actions d.Auditors have a duty of care only to the shareholders.arrow_forwardThe following pertains to auditor legal liability standards under the PSLRA:a. The Reform Act requires that, in any private securities fraud action in which the plaintiff is alleging a misleading statement or omission on the part of the defendant, “the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.”90Do you believe this standard better protects auditors from legal liability than the standards which existed before the PSLRA? Explain.b. Do you believe the change in standards for auditors’ liability under the PSLRA from joint-and-several to proportional liability was a good thing? Explain.arrow_forward
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