auditing and assurance services 15e chap5 sm

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1、Chapter5LegalLiability

2、lityforprotectinginvestors’interests.3.Thegreatercomplexitiesofauditingandaccountingduetotheincreasingsizeofbusinesses,theglobalizationofbusiness,andtheintricaciesofbusinessoperations.4.Society’sincreasingacceptanceoflawsuits.5.LargecivilcourtjudgmentsagainstCPAfirms,whichhavee

3、ncouragedattorneystoprovidelegalservicesonacontingentfeebasis.6.ThewillingnessofmanyCPAfirmstosettletheirlegalproblemsoutofcourt.7.Thedifficultycourtshaveinunderstandingandinterpretingtechnicalaccountingandauditingmatters.5-2Themostimportantpositiveeffectsaretheincreasedquality

4、controlbyCPAfirmsthatislikelytoresultfromactualandpotentiallawsuitsandtheabilityofinjuredpartiestoreceiveremunerationfortheirdamages.Negativeeffectsaretheenergyrequiredtodefendgroundlesscasesandtheharmfulimpactonthepublic’simageoftheprofession.Legalliabilitymayalsoincreasetheco

5、stofauditstosociety,bycausingCPAfirmstoincreasetheevidenceaccumulated.5-3Businessfailureistheriskthatabusinesswillfailfinanciallyand,asaresult,willbeunabletopayitsfinancialobligations.Auditriskistheriskthattheauditorwillconcludethatthefinancialstatementsarefairlystatedandanunqu

6、alifiedopinioncanthereforebeissuedwhen,infact,theyaremateriallymisstated.Whentherehasbeenabusinessfailure,butnotanauditfailure,itiscommonforstatementuserstoclaimtherewasanauditfailure,evenifthemostrecentlyissuedauditedfinancialstatementswerefairlystated.Manyauditorsevaluatethep

7、otentialforbusinessfailureinanengagementindeterminingtheappropriateauditrisk.5-4Theprudentpersonconceptstatesthatapersonisresponsibleforconductingajobingoodfaithandwithintegrity,butisnotinfallible.Therefore,5-16theauditorisexpectedtoconductanauditusingduecare,butdoesnotclaimtob

8、eaguarantororinsureroffinancialstatements.5-5Thediffer