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Presentation Audit - Legal Liability

Audit professionals have a responsibility under common law to fulfill implied or expressed contracts with clients. They are liable to their clients for negligence and / or breach of contract should they fail to provide the services or not exercise due care in their performance. Despite efforts by the profession to address the legal liability of CPAs. Both the number of lawsuits and sizes of awards to plaintiffs remain high.

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Vasant Sriudom
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209 views29 pages

Presentation Audit - Legal Liability

Audit professionals have a responsibility under common law to fulfill implied or expressed contracts with clients. They are liable to their clients for negligence and / or breach of contract should they fail to provide the services or not exercise due care in their performance. Despite efforts by the profession to address the legal liability of CPAs. Both the number of lawsuits and sizes of awards to plaintiffs remain high.

Uploaded by

Vasant Sriudom
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PRESENT BY:

USWATUN HASANAH BINTI SHUIB

NUR AMIRAH BINTI ASMANI

VASANT A/L CHUAN

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Audit professionals have a responsibility under common law to fulfill implied or expressed contracts with clients. They are liable to their clients for negligence and/or breach of contract should they fail to provide the services or not exercise due care in their performance.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Despite efforts by the profession to address the legal liability of CPAs Both the number of lawsuits and sizes of awards to plaintiffs remain high.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Audit Risk Audit Failure Business Failure

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Audit Risk It represents the risk that the auditor will conclude that the financial statements are fairly stated and an unqualified opinion can be issued when, in fact, they are materially misstated.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Audit Failure It occurs when the auditor issues an incorrect audit opinion because it failed to comply with the requirements of auditing standards.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Business Failure It occurs when a business is unable to repay its lenders or meet the expectations of its investors because of economic or business conditions.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Business failure

Audit failure

Audit risk

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Prudent

Person Concept Liability For The Act of Other Lack of Privileged Communication

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

The most common source of lawsuits against CPAs is from clients.

Lack

of Duty Non-negligent Performance Contributory Negligence Absence of Causal Connection

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Lack

of Duty The lack of duty to perform the service means that public accounting firm claims that there was no implied or expressed contract.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Non-negligent

Performance

For non-negligent performance in an audit, the accounting firm claims that the audit was performed in accordance with standards.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Contributory

Negligence

A defense of contributory negligent exists when the clients own action either resulted in the loss that is the basis for damages or interfered with the conduct of the audit.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Absence

of Causal Connection The client must be able to show that there is a close causal connection between that auditors breach or the standard of due care and the damages suffered by the client.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Describe accountants liability to third parties under common law and related defenses.
Ultramares

Doctrine Foreseen Users


Credit Alliance Restatement of Torts Foreseeable User

Auditor Defenses Against Third Party Suits

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Securities

Commission Act 2003 Section 46 of Company Act 1965

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Securities

Commission Act 2003

Any third party who purchase securities described in registration statement may sue the auditor for material misrepresentation or omissions in audited financial statement included in the registration statement.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Section

46 of Company Act 1965

It provided an auditor, as an expert who authorises and causes the issue of the prospectus is liable to pay compensation to persons who purchase shares or debentures on the faith of the prospectus for any loss sustained by reason of untrue statement or willful non-disclosure of any mater which is material.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

CPAs can be held liable under criminal liability for accountants.

CPAs can be found guilty for criminal action under both federal and state laws.

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Research Standard Set

in Auditing and Rule Setting

Requirement to Protect Auditors

Establish

peer review requirements

Oppose

lawsuits

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Education Sanction

of users

members for improper conduct and performance for changes in laws

Lobby

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Deal Hire

only with clients possessing integrity qualified personnel the standards of the profession

Follow

Maintain

independence the clients business

Understand

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Perform

quality audits the work properly

Document Obtain

an engagement and a representation

letter
Maintain

confidential relations

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Carry Seek

adequate insurance

legal counsel a form of organization with limited

Choose

liability
Exercise

professional skepticism

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

WE HOPE YOU ALL

From: Uswatun Hasanah Binti Shiub Nur Amirah Binti Asmani Vasant a/l Chuan

Hak Cipta Kumpulan Perbentangan, Kumpulan 5 DAT 6B Sesi Disember 2010

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