Auditor Liability – NBC Institute

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

Question

Yakubu Chukwu & Co was sued by one of its clients who alleged that the firm failed to satisfy the auditing standards in identifying substandard and obsolete inventory while attending end-of-year stock take. Which of the following is the firm’s best defence?
A. It is quite impossible to expect the firm to identify substandard and obsolete inventory due to the special nature of the inventory
B. Yakubu Chukwu & Co has to prove that its audit has been carried out with reasonable skill, care, and diligence
C. Auditing standards are not legislated, therefore, the client has no right to sue the firm
D. The contributory negligence of the client
E. Identification of substandard and obsolete stock requires an expert opinion

Answer

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Tags: Audit Standards, Auditor Liability, Defence, Obsolete Inventory
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

Question

Audit firms have been castigated over the years by the public whenever their clients have any financial or operational crises. The potential liability of auditors has also become an important topic in recent years due to the growing complexity of the business and legal environment and an increase in legal actions against auditors. One reason put forward to explain the high number of legal actions against auditors is the “expectation gap.”

Required:

a) Explain “expectation gap” and describe its THREE main elements. (5 Marks)

b) Discuss the strategies that could assist in closing the expectation gap. (10 Marks)

c) i. Explain briefly the concept of professional skepticism. (2 Marks)
ii. Evaluate the importance of professional skepticism in the audit of financial statements. (3 Marks)

(Total 20 Marks)

Answer

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Tags: Audit quality, Auditor Liability, Expectation Gap, Legal Environment, Professional Skepticism, Public Perception, Strategies to Close Gap
Level: Level 3

Topic: Auditor’s Legal Liability
Series: MAY 2018

AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

Question

b) You are also responsible for providing direction to more junior members of the audit department of your firm on technical matters. Several recent recruits have asked for guidance in the area of auditor’s liability. They are keen to understand how an audit firm can reduce its exposure to claims of negligence. They have also heard that in some countries, it is possible to restrict liability by making a liability limitation agreement with an audit client.

Required:

Explain five methods that may be used by an audit firm to reduce exposure to litigation claims. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Liability, Litigation Risk, Professional Responsibility
Level: Level 3

Topic: Professional responsibility and liability
Series: NOV 2015

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Standards, Auditor Liability, Defence, Obsolete Inventory
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

Question

Required:

a) Explain “expectation gap” and describe its THREE main elements. (5 Marks)

b) Discuss the strategies that could assist in closing the expectation gap. (10 Marks)

c) i. Explain briefly the concept of professional skepticism. (2 Marks)
ii. Evaluate the importance of professional skepticism in the audit of financial statements. (3 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit quality, Auditor Liability, Expectation Gap, Legal Environment, Professional Skepticism, Public Perception, Strategies to Close Gap
Level: Level 3

Topic: Auditor’s Legal Liability
Series: MAY 2018

AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

Question

Required:

Explain five methods that may be used by an audit firm to reduce exposure to litigation claims. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Liability, Litigation Risk, Professional Responsibility
Level: Level 3

Topic: Professional responsibility and liability
Series: NOV 2015

Question Tag: Auditor Liability

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AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

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Question Tag: Auditor Liability

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AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

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AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

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AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

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AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability"

AAA – May 2018 – L3 – SB – Q2 – Auditor’s Legal Liability

Discuss the expectation gap, strategies to address it, and the role of professional skepticism in auditing financial statements.

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AAA – Nov 2015 – L3 – Q1b – Professional responsibility and liability

Methods that an audit firm can use to reduce exposure to litigation claims.

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