20审计学-基于环境变化的概念14.pptVIP

Chapter 17 Professional Liability What is the public accountants responsibility? ? The responsibility of public accountants to safeguard the publics interest has increased as the number of investors has increased, as the relationship between corporate managers and stockholders has become more impersonal, and as government increasingly relies on accounting information. Discuss Auditor Liability Auditor liability to their clients and third party user groups is derived from the following laws: ? Contract law - Liability is based on breach of contract. The contract is usually between the public accounting firm and the client for performance of a professional service, such as an audit performed according to GAAS ? Common law - Liability concepts developed through court decisions and based on auditor negligence, gross negligence or fraud ? Statutory law - Liability based on state statutes or Federal securities laws. The most important of these to the auditing profession are the Securities Act of 1993 and the Securities and Exchange Act of 1934 Factors leading to increased litigation against auditors: User awareness of the possibilities and rewards of litigation ? Joint and several liability statutes that permit a plaintiff to collect the full amount of the settlement from any defendant, even those only partially responsible for the loss (i.e. deep pockets theory) ? Increased audit complexity caused by computerized systems, new types of transactions and operations, more complicated accounting standards, more international business ? More demanding audit standards for detection of errors and fraud Factors leading to increased litigation against auditors: ? Pressures to reduce audit time and improve audit efficiency ? Misunderstanding by users that an unqualified opinion is an insurance policy against misstatements (expectations gap) ? Contingent-fee-based compensation for law firms, especially in class action lawsuits ? Class action lawsuit