- 20 Marks
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)
Find Related Questions by Tags, levels, etc.