1. Valley View Manufacturing Inc. sought a $500,000 loan from First National Bank. First National insisted that audited financial statements be submitted before it would extend credit. Valley View agreed to do so, and an audit was performed by an independent CPA who submitted her report to Valley View. First National, upon reviewing the audited statements, decided to extend the credit desired. Certain ratios used by First National in reaching its decision were extremely positive indicating a strong cash flow. It was subsequently learned that the CPA, despite the exercise of reasonable care, had failed to discover a sophisticated embezzlement scheme by Valley Views chief accountant. Under these circumstances, what liability might the CPA have?

2. What are the costs and benefits of establishing one set of accounting standards (i.e., IFRS) around the world? How do cultural factors, legal systems, and ethics influence your answer? Apply a utilitarian approach in making the analysis.