Legal Liability Australia Case Study 2022

Running head: LEGAL LIABILITY
Legal Liability
Name of the Student
Name of the University
Author’s Note

2LEGAL LIABILITY
Table of Contents
1. Whether the Audit Firm Has Acted with Reasonable Care and Skill..........................................3
2. How the Lawyers might present the Case against the Auditors..................................................4
3. Why the Audit Partner May Still Offer a Significant Settlement Amount..................................5
References........................................................................................................................................7

3LEGAL LIABILITY
1. Whether the Audit Firm Has Acted with Reasonable Care and Skill
Whether reasonable skill and care was there in conducting the audit of ABC by Price
Young Andersen is the main issue to ascertain in this case.
One such example is the Pacific Acceptance Case where it was stated that following and
complying with the required audit standards needs to be considered as reasonable care and skills.
As per this case, for the determination of the presence of reasonable care and skills in the actions
of the auditors, the count only determines whether the obligatory audit standards were adhered to
by the auditors (Krambia-Kapardis, 2015).
Another key example that is the Kingston Cotton Mill case states that in case an auditor
exercises reasonable care and skill like another competent auditor, it is believed that reasonable
care and skill was exercised by the auditor (Chandler, 2019).
In the given case of Price Young Andersen and ABC, the audit firm properly complied
with all the standards that were obligatory in the situation for conducting the audit of ABC. The
auditor performed all the required audit procedures and the same were reviewed by the senior
audit partner along with the audit director. The result of the audit work reviewed by the peer
firms shows that all the audit standards and procedures were followed by the auditor. Australian
Auditing Standard ASA 240 is the significant audit standard in this circumstance that states that
the audit needs to be undertaken by the auditors by considering the probability that fraud can
take place in the financial statements; and the same has been followed by the auditor of Price
Young Andersen (Free & Murphy, 2015). Overall, the auditor maintained proper compliance
with the obligatory standards while completing all the required audit procedures. All these