Question: QUESTION 1 10 points Save Answer You are the senior auditor of No Frills Ltd (NFL), and your long standing client Ocean Ltd is

QUESTION 1 10 points Save Answer You are the senior auditor of

QUESTION 1 10 points Save Answer You are the senior auditor of No Frills Ltd (NFL), and your long standing client Ocean Ltd is experience some financial difficulties and requires extra cash to pay their creditors. Your client approaches Sea Bank for a loan amount of $5 million. Sea Bank requested Lender Ltd to provide a audited financial report before they could approve Ocean's loan. Ocean Ltd agreed to this, and agreed to pay for the audit fee. NFL performed the audit for Ocean Ltd and stated that this audited report is solely used for the loan negotiation with Sea Bank. Sea Bank after reviewing the audited financial statement prepared by NFL, decided not to approve the loan. Lender Ltd used the same audited financial statement to obtain a loan from Riverbank. However, it was subsequently discovered that the auditor had failed to detect a significant embezzlement by a senior manager at Lender Ltd. Required a. What are the liabilities, if any, of the auditor? To whom is the auditor liable? 4 marks b. If the auditor did uncover the embezzlement, and noted it in the notes to the financial statement, is he still liable and to whom? - 3 marks c. What factors should appropriately be considered before the auditor's liability is confirmed? 3 marks

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