Refer to the Professional Judgment in Context feature at the outset of the chapter, which features the

Question:

Refer to the Professional Judgment in Context feature at the outset of the chapter, which features the litigation charges against KPMG for its audit failures during the subprime mortgage crisis.
a. How does the business environment affect the litigation risk faced by audit firms?
b. Should auditors be held liable if their client’s business fails or if the contain a fraud that the auditors did not detect?
c. What defenses do auditors use in response to litigation?
d. What actions can auditors take to minimize litigation exposure?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...