5B3030 Audit & Assurance Winter

5B3030 Audit & Assurance Winter - WINTER SESSION 2007/8...

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Unformatted text preview: WINTER SESSION 2007/8 Summative assessment for the BA (HONOURS) ACCOUNTING AND FINANCE PATHWAYS BUSINESS SCHOOL OPTION FINAL YEAR 5B3030 AUDIT AND ASSURANCE UNIT LEADERS: NEIL RODDA/BARRY MOUNSEY Friday 11 th January 2008 2:30pm 4:30pm Instructions to Candidates Time allowed: 2 hours Answer the one compulsory question in accordance with the requirements. Because this is an open book assessment you may take in whatever written material you consider useful to you. 1 FINAL YEAR OPTION : 5B3030 AUDIT AND ASSURANCE ASSESSED WORK ASSIGNMENT 2007/8 The following question is compulsory and ALL parts should be answered: Question 1 The issue of auditor liability has, for many years, been debated in the UK. The increase in the frequency and size of legal claims against audit firms has resulted in such firms arguing that they face an unacceptably high risk of litigation. Legislation in the UK however has prevented auditors from limiting their liability to audit clients with regard to statutory audits. The body of case law in the UK is extensive with cases stretching back to the late 1800s and continues to date. The findings in some of these cases have sometimes contradicted or questioned the findings in earlier judgements. The European Commission recently undertook a consultation exercise dealing with a variety of ways in which auditors might be allowed to limit their liability in respect of statutory audits. The initial responses to the proposals in the initial consultation have been published. The ability of auditors to limit their exposure to substantial legal claims has important implications for audit firms, audited entities, shareholders and other interested parties. Required: You are required to write an essay that: (a) Describes the parties to whom an auditor might be liable and the circumstances in which such liability might be found by reference to the facts and principles of key cases; (b) Explains the possible methods of allowing an auditor to limit their exposure to liability and current developments in this area; (c) Discusses the arguments for and against auditors being able to limit their liability; (d) Justifies an overall conclusion on the issue of auditor liability based on your research. Note that all parts (a) to (d) inclusive carry equal weighting. Students should make reference to appropriate literature and include a bibliography. A copy of the assignment brief is attached to this question paper. 2 FINAL YEAR OPTION : 5B3030 AUDIT AND ASSURANCE ASSESSED WORK ASSIGNMENT BRIEF 2007-8 TOPIC : AUDITOR LIABILITY PRELUDE: The issue of auditor liability has, for many years, been debated in the UK. The increase in the frequency and size of legal claims against audit firms has resulted in such firms arguing that they face an unacceptably high risk of litigation. Legislation in the UK however has prevented auditors from limiting their liability to audit clients with regard to statutory audits....
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5B3030 Audit & Assurance Winter - WINTER SESSION 2007/8...

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