Assignment on External Auditing
Added on 2020-04-15
9 Pages1950 Words50 Views
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Running head: AUDITINGAuditingName of the Student:Name of the University:Author’s Note:Course ID:
1AUDITINGTable of ContentsAnswer to Question 1:................................................................................................................2Introduction:...........................................................................................................................2Discussion:.............................................................................................................................2Conclusion:............................................................................................................................3Answer to Question 2:................................................................................................................3Introduction:...........................................................................................................................3Discussion:.............................................................................................................................3Conclusion:............................................................................................................................4Answer to Question 3:................................................................................................................5Introduction:...........................................................................................................................5Discussion:.............................................................................................................................5Conclusion:............................................................................................................................6References:.................................................................................................................................7
2AUDITINGAnswer to Question 1:Introduction:The external auditors conduct their responsibilities based on the quantum ofinformation that their clients have supplied to them. However, it is the accountability of theexternal auditors to determine the accuracy and use it as a basis for developing the auditopinion (Abernathy et al. 2014). As a result, if a third party depend on such support andsuffer serious losses, the liability should fall on the external auditors, if they intentionallyconnive in falsifying the reports for favouring their clients. In opposition, they must not beheld accountable, which is a sound cause that they include disclaimers in the reportsexpressly. Discussion:The applications of the law of tort in the profession of auditing and the methodthrough which the auditors are planning to minimise their exposure to the ensuing liabilitieshave been shaped through certain recent landmark cases. The most significant case chosen is“Caparo Industries Plc (Caparo) v Dickman (1990)”. In this case, Caparo pursued ToucheRoss following a group of share purchases of an organisation, Fidelity Plc. According to theallegations of Caparo, the purchase decisions have been based on incorrect accounts, whichovervalued the organisation (Doxey et al. 2016). In addition, another claim has been madethat Touche Ross owed a duty of care to the potential investors as auditors of fidelity.However, the claim has been unsuccessful, since the court has inferred that the preparation ofaccounts have been made for the existing shareholders to exercise their class rights. Inaddition, the auditors had no prior knowledge that Caparo would put the accounts forpurchase (Earley et al. 2016). This case provides evidence of the duty of care between anauditor and a third party. According to this ruling, this takes place when
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