Question

what expressions enable a CPA to build a defense should the audit wind up in the courtroom? do you see anything wrong with these expressions from an ethical point of view

Answer 1

The expressions that a CPA can use for building a defense should the audit wind up in the courtroom are expressions like:

“On a test basis”

“Reasonable assurance”

“The financial statements are the responsibility of the management”

“In all material respects”

The above mentioned statements can be used by a CPA for building a defense as these statements states that the audit does not examine everything and the audit opinion is based on the judgment of the auditor. The judgment is formed on the basis of facts provided by the management and hence there is no guarantee that the result or the opinion is accurate and error-free.

Yes, I see that the above statements are not proper from an ethical point of view. Firstly the CPA, by using the above statements, is not taking the responsibility of the work done by him/her. It is the duty of a CPA to pressure management for accurate information and then to audit the information in a manner that ensures that it is error free. By absolving itself of this responsibility through the above mentioned statements the CPA is not behaving in a moral manner.