ACC 5400 Chapter Notes - Chapter 5: Audit Risk, Contributory Negligence, Foreign Corrupt Practices Act

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23 Sep 2018
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Should auditors fail to provide the services or not exercise due care in their performance, they are liable to their clients for negligence and/or breach of contract, and , in certain circumstances to parties other than their clients. Auditor generally owes duty of care to third parties who are part of a limited group of persons, whose reliance is foreseen by the auditor. Criminal conviction can result if plaintiff demonstrates that the auditor intended to die/ harm others. Distinguishing business failure, audit failure, and audit risk. Business failure : business is unable to repay its lenders or meet expectations of its investors bc of economic or business conditions. Audit failure: auditor issues an incorrect audit opinion bc it failed to comply w/ reqs of auditing standards. Audit risk : represents possibility that auditor concludes after conducting an adequate audit that the fin. Smts wer fairly stated, when, in fact, they were materially misstated.

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