question 9

(TCO D) You are a CPA. You worked 2 years for a CPA firm doing audits and now you have just completed your first year in your own CPA firm. Your physician audit client, whom you just issued an unqualified opinion, has just determined that his accountant has been stealing about $300,000 per year from their physician medical practice, which you failed to detect during your audit. You had warned the managing partner that they did not have adequate internal controls. Are you liable? Explain your defense and possible legal liability.