- 1 Marks
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
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