Auditing and Assurance Service

Auditing and Assurance Service

 An article on auditing and assurance services, majoring on legal liabilities is selected for this assignment. The article, seventeenth edition, was published in 2020. Reading through the article, I was able to gain a lot, especially on accounting and financial, legal liabilities. 

After scanning through the paper, I was able to postulate the environment for CPA operations. A CPA auditor must care for the third parties, often limited to specific individuals, and under the statutory laws, can be held liable to these third parties. In addition to the statutory laws, CPA operations are also governed by common law liabilities (Eilifsen et al. 5). Although auditors are held liable for those parties, a small number of them has been held liable for criminal activities.

 Additionally, I understood the reason behind the tremendous increase of lawsuits and award sizes to plaintiffs.  Some of these reasons are the complexity of accounting and auditing functions and economical changes (Eilifsen et al. 5). Furthermore, the propensity in culture to support wounded persons' claims against someone who may give compensation is another reason the increased CPA related lawsuits. 

Before going through the article, the difference between business failure, audit failure and audit risk was not very clear to me. Business failure occurs when an enterprise is unable to meet its investors' expectations or repay lenders. In contrast, audit failure happens when an auditor provides an incorrect audit opinion due to requirements and audit standards compliance failure. On the other hand, audit risk is the likelihood of the auditor concluding without an appropriate audit that the financial statements were reasonably reported when they were, in fact, significantly misrepresented (Eilifsen et al. 10). 

In conclusion, I can attest that the article was educative to me, and it improved my accounting knowledge, especially on legal liabilities and clarity on various accounting terminologies.

Work Cited 

Eilifsen, A., Messier, W.F., Glover, S.M. and Prawitt, D.F., 2020. Auditing and assurance services.