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