Explain the various ways auditors can reduce their exposure to audit liabilities

Expert Solution

The various ways in which auditor can reduce their exposure to audit liabilities is as follows-

1. Preach professional skepticism-It is imperative to practice high level of professional skepticism on all the engagements. An auditor needs to have a questioning mind and practice professional judgement. Excessive familiarization with the client can diminish professional judgement.

2. Continual Involvement of Engagement leaders- The continuous involvement of engagement leaders ensure high quality of deliverable and engagement profitability. The leaders should not delegate the responsibilities even if the staff Is highly trained and experienced.

3.Approach each client differently- The standard approaches to audit without carefully considering the facts and circumstances of each client can increase the possibility of errors and frauds. An auditor needs to be open minded and look for uniqueness when approaching each client.

4. Don't get involved with high risk clients- Clients which create a crisis oriented culture increases the possibilities of lawsuit and a client portfolio which comprises of less quality clients. These troublemakers should be avoided in order to ensure least exposure.

5.Review engagement letters carefully- An engagement letter is an agreement for a firm to provide services to the client. It lists down the services to be performed. The engagement leader should obtain information about the clien'ts history of fraud, changes in operations and any economic effect. It can help improve quality, efficiency and reduce the auditor's liability.

ekkarill92 answered 1 year ago

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Explain the various ways auditors can reduce their exposure to audit liabilities

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