Get help now

Auditing and Assurance WA2

  • Pages 2
  • Words 420
  • Views 317
  • dovnload



  • Pages 2
  • Words 420
  • Views 317
  • Academic anxiety?

    Get original paper in 3 hours and nail the task

    Get your paper price

    124 experts online

    They should use the resistance of meeting auditing standards and contributory neglegence. Stuart Supply Company management is responsible for the fraud. The fraud was complicated and difficult to discover, but the steps recommended by Lauren Yost & Co made it possible. The president of Stuart Supply Company ignored the proposal to count the inventory on the same day, and was therefore responsible to breakdown of detecting the fraud due to his decision. Luckily, Lauren Yost & Co can use his signed statement as evidence against him.

    Two defenses are possible: lack of privity of contract, and using auditing standards in the audit of inventory in a suit by First City National Bank. Since the bank was a third party, there is not necessarily any responsibility to the party in this instance. Given this, the defense of lack of privity of contract is unlikely to be successful in most jurisdictions.

    The second defense has a higher likelihood of success because it used auditing standards when auditing stock and employment of due care. It is generally a challenge to expect a CPA firm to identify an unusual problem like this during an ordinary audit. Therefore, just because the CPA did not identify it does not mean it shares any responsibility for it. c. Yost will likely be successful in defending against the client using contributory negligence.

    The company was solely responsible for setting up solid internal controls. The company’s president stated manning made it impossible to count all stock in one day, and customer preference imposed put a burden on the company for its own losses. d. Both issues and the results would probably be mostly the same if the suit were brought under the 1934 Act. If it was brought under Rule 10b-5, it is not likely the plaintiff would be successful as there was no reason for the company to deceive. 19.

    The CPA firm would not usually be liable as they relied on the incorrect financial statement, and the firm did not have a contract with the creditor. However, a fraud still exists, whether actual or constructive. As the creditor relied on the illegally prepared financial statements, the CPA firm will still be liable for the fraud. This was a constructive fraud on the part of Small or a firm. The auditor was negligent as he or she had a disregard for the truth and based their report on a faulty basis of judgment. Small turned a blind eye towards the negligence. Thus, the firm is liable to the creditors.

    This essay was written by a fellow student. You may use it as a guide or sample for writing your own paper, but remember to cite it correctly. Don’t submit it as your own as it will be considered plagiarism.

    Need a custom essay sample written specially to meet your requirements?

    Choose skilled expert on your subject and get original paper with free plagiarism report

    Order custom paper Without paying upfront

    Auditing and Assurance WA2. (2016, Dec 01). Retrieved from

    Hi, my name is Amy 👋

    In case you can't find a relevant example, our professional writers are ready to help you write a unique paper. Just talk to our smart assistant Amy and she'll connect you with the best match.

    Get help with your paper
    We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy