B&Y Partners (BY) is an audit firm located in Hamilton Ontario. Last year it audited DFI Inca publicly traded company. Although the company has been profitable for many years, B&Y was hired by major creditor who was considering extending a large loan to DFI. DFI has a December 31, 2018 year end.

B&Y conducted the audit and gave an unmodified opinion, dated February 1, 2019.

A group of former employees purchased $750,000 of the common stock of DFI in 2017, intending to hold the stock as a long-term investment. Unfortunately, DFI went bankrupt in 2019 .DFI had a large customer that also purchased goods from DFI throughout all of 2018.

a. Explain, with reason, the parties the auditor owes a duty of care to if any.

b. Identify 4 reasons how auditors can limit their liability in performing an audit of financial statements?

Answer rating: 100% (QA)

Part A The basic objective of the auditor of the company is to form an independent opinion on the f... View the full answer