阿伦斯审计学一种整合的方法课后习题答案ch05.docVIP

SEQ CHAPTER \h \r 1Chapter 5 Legal Liability Review Questions 5-1 Several factors that have affected the increased number of lawsuits against CPAs are: The growing awareness of the responsibilities of public accountants on the part of users of financial statements. An increased consciousness on the part of the SEC regarding its responsibility for protecting investors interests. The greater complexities of auditing and accounting due to the increasing size of businesses, the globalization of business, and the intricacies of business operations. Societys increasing acceptance of lawsuits. Large civil court judgments against CPA firms, which have encouraged attorneys to provide legal services on a contingent fee basis. The willingness of many CPA firms to settle their legal problems out of court. The difficulty courts have in understanding and interpreting technical accounting and auditing matters. 5-2 The most important positive effects are the increased quality control by CPA firms that is likely to result from actual and potential lawsuits and the ability of injured parties to receive remuneration for their damages. Negative effects are the energy required to defend groundless cases and the harmful impact on the publics image of the profession. Legal liability may also increase the cost of audits to society, by causing CPA firms to increase the evidence accumulated. 5-3 Business failure is the risk that a business will fail financially and, as a result, will be unable to pay its financial obligations. Audit risk is the risk that the auditor will conclude that the financial statements are fairly stated and an unqualified opinion can therefore be issued when, in fact, they are materially misstated. When there has been a business failure, but not an audit failure, it is common for statement users to claim there was an audit failure, even if the most recently issued audited financial statements were fairly stated. Many auditors evaluate the potential for business fail