When an audit client’s financial statements are found to be materially misstated due to fraud and the auditor failed to discover the misstatement, what are the various potential consequences for the auditor? What are the likely allegations and charges and by whom? How does the capital structure of the audit client impact your answer?
Answer to relevant QuestionsIs it important whether an auditor is charged under common law or statutory law, and why or why not? How do the laws differ? What are the reasons why a plaintiff might prefer to bring a case in state or federal court?Briefly explain why the severity of the wrongdoing alleged against the auditor and the closeness of the relationship between the plaintiff and auditor have an impact on the likelihood that the auditor will have to pay ...Mustian Properties, Inc. recently filed bankruptcy, as it is unable to make payments on several vacant properties in its condominium complexes near Las Vegas and Lake Tahoe.Last year, Mustian borrowed $3 million from Field ...Why does audit risk create business risk for an auditor, and how does the legal environment of business affect the auditor’s business risk?How do your answers to 3, 4, and 5 change for a gross negligence cause of action?
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