Auditor's legal liability refers to the responsibility and potential legal consequences that auditors face for the performance of their auditing duties. Auditors are entrusted with the task of examining a company's financial statements and providing an independent opinion on their accuracy and fairness. If auditors fail to detect material misstatements or fraudulent activities during the audit process, they may be held legally liable for any resulting financial losses suffered by stakeholders, including investors, creditors, and the public. Auditors' legal liability can arise from various sources, including breaches of contract, negligence, fraud, or violations of auditing standards and regulations. To mitigate their legal risks, auditors must exercise due professional care, adhere to auditing standards, maintain independence, and communicate effectively with stakeholders regarding audit findings.

Objective Question:

Which factor contributes significantly to an auditor's legal liability?

a$)$ Providing an independent opinion on financial statements.

b$)$ Failure to detect material misstatements or fraudulent activities.

c$)$ Communication of audit findings to company management.

d$)$ Offering consulting services in addition to audit engagements.