2、lityforprotectinginvestors’interests.3.Thegreatercomplexitiesofauditingandaccountingduetotheincreasingsizeofbusinesses,theglobalizationofbusiness,andtheintricaciesofbusinessoperations.4.Society’sincreasingacceptanceoflawsuits.5.LargecivilcourtjudgmentsagainstCPAfirms,whichhavee
3、ncouragedattorneystoprovidelegalservicesonacontingentfeebasis.6.ThewillingnessofmanyCPAfirmstosettletheirlegalproblemsoutofcourt.7.Thedifficultycourtshaveinunderstandingandinterpretingtechnicalaccountingandauditingmatters.5-2Themostimportantpositiveeffectsaretheincreasedquality
4、controlbyCPAfirmsthatislikelytoresultfromactualandpotentiallawsuitsandtheabilityofinjuredpartiestoreceiveremunerationfortheirdamages.Negativeeffectsaretheenergyrequiredtodefendgroundlesscasesandtheharmfulimpactonthepublic’simageoftheprofession.Legalliabilitymayalsoincreasetheco
5、stofauditstosociety,bycausingCPAfirmstoincreasetheevidenceaccumulated.5-3Businessfailureistheriskthatabusinesswillfailfinanciallyand,asaresult,willbeunabletopayitsfinancialobligations.Auditriskistheriskthattheauditorwillconcludethatthefinancialstatementsarefairlystatedandanunqu
6、alifiedopinioncanthereforebeissuedwhen,infact,theyaremateriallymisstated.Whentherehasbeenabusinessfailure,butnotanauditfailure,itiscommonforstatementuserstoclaimtherewasanauditfailure,evenifthemostrecentlyissuedauditedfinancialstatementswerefairlystated.Manyauditorsevaluatethep
7、otentialforbusinessfailureinanengagementindeterminingtheappropriateauditrisk.5-4Theprudentpersonconceptstatesthatapersonisresponsibleforconductingajobingoodfaithandwithintegrity,butisnotinfallible.Therefore,5-16theauditorisexpectedtoconductanauditusingduecare,butdoesnotclaimtob
8、eaguarantororinsureroffinancialstatements.5-5Thediffer
