Auditing and Assurance | Assignment | Answers

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE
Table of Contents
Answer to Question 1......................................................................................................................2
Introduction..................................................................................................................................2
Answer to Requirement 1............................................................................................................2
Answer to Requirement 2............................................................................................................2
Answer to Requirement 3............................................................................................................3
Answer to Requirement 4............................................................................................................3
Conclusion...................................................................................................................................3
Answer to Question 2......................................................................................................................4
Advise to Jack regarding the Information of the Audit of Switch Ltd........................................4
References........................................................................................................................................8

2AUDITING AND ASSURANCE
Answer to Question 1
Introduction
In case a plaintiff wants to win a lawsuit for negligence against the defendant, he/she is
needed to prove all the elements of tort of negligence (Dobson, 2015). The same aspects is also
applicable in audit-client relationship as the client or any other third party is required to prove the
presence of all elements of tort of negligence winning the lawsuit against the auditor.
Answer to Requirement 1
Duty of care, Breach of duty of care, Cause in fact and Damages are the four elements of
tort of negligence and these are further discussed below:
1. Duty of Care – The result of the negligence cases depend on whether the defendant owed a
duty of care to the plaintiff (Pappalardo, 2015). The facts of the case demonstrates that Oscar
Edwards Vance (OEV) is the audit partner of Framed Ltd; and as per law, there is a relationship
between OEV and Framed Ltd that requires OEV to act in the best interest of Framed Ltd.
2. Breach of Duty of Care – Along with proving the presence of duty of care, the plaintiff needs
to prove that there is violation of duty of care. There might be violation of duty of care in Framed
Ltd as OEV issued unmodified audit opinion even in the presence of materially overstated sales
and receivables (Buckley, 2018).
3. Cause in Fact – This requires proving that the actions of the defendant are the actual reason
of the plaintiff’s damage. The damages of Framed Ltd’s creditors were due to the issue of wrong
audit opinion by OEV.
4. Damages – It is required for the plaintiff to prove a legally recognized harm or damage. For
example, VicBank had to face financial loss due to extending credit to Framed Ltd.
Answer to Requirement 2
The audit-client relationship between OEV and Framed Ltd proves that OEV owed duty
of care to Framed Ltd; and this was violated when OEV failed in recognizing the fraud carried
out by two of Framed Ltd’s sales representatives for earning bonus which materially overstated
sales and receivables. This proves that whatever damage is caused to Framed Ltd was because of