1- Glover, Inc., engaged Herd & Irwin, CPAs, to assist in the installation of a new computerized production system. Because the firm did not have experienced staff available for the engage- ment, Herd & Irwin assigned several newly hired staff assistants without sufficient supervi- sion. As a result, Glover, Inc., incurred significant losses when the production system crashed, causing significant backlogs and lost product sales.

Describe the possible legal implications of this situation for Herd & Irwin.

2- Jensen, Inc., filed suit against a public accounting firm, alleging that the auditors negligence was responsible for failure to disclose a large defalcation that had been in process for several years. The public accounting firm responded that it may have been negligent, but that Jen- sen, Inc., was really to blame because it had completely ignored the public accounting firms repeated recommendations for improvements in internal control.

If the public accounting firm was negligent, is it responsible for the loss sustained by the client? Does the failure by Jensen, Inc., to follow the auditors recommendation for better internal control have any bearing on the question of liability? Explain.