1. An audit opinion results in audit failure and the auditing firm is sued by a third party beneficiary.  If the stakeholder sues the CPA for Common Law Fraud, based upon false information and data contained in the Annual Report, which of the following is the BEST defense for the CPA?

 

1. There was contributory negligence on the part of the Management Team
2. The Engagement Letter contained an exclusion for liability to all third party beneficiaries
3. The false information contained in the financial statements was asserted to be immaterial
4. The third-party beneficiary lacked the privity to sue.

Two assertions made by management in the financial reporting process for which the auditor conducts a review of the accounts receivable balances will provide primary evidence are:

1. Rights & Obligations, Valuation
2. Existence and Completeness
3. Obligations & Existence, Rights
4. All of the above