Question 3. Auditor legal liability (10 marks)

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In the Lakeside Company case studyyou explored the potential legal liability of our firm (Abernethy & Chapman) when we take on a new client.

Based on legal precedent (that is decided legal cases you studied in your text), discuss and evaluate the possible liability to the client and to third parties(present and potential) that our firm (Abernethy & Chapman) might incur by accepting the Lakeside Company as a new audit client (you need to draw on facts presented in Lakeside and explain how they illustrate the relevant legal precedent).