Question:

The auditor is required to express an opinion on a set of financial statements. Audit risk is the probability that the auditor will express an incorrect opinion resulting in financial loss to persons acting upon the audit opinion given. There are laws and regulations in place which provide protection for stakeholders who suffer losses from reliance on the auditors report which may be found lacking.

In reference to the legal and regulatory framework of the auditing profession, what are the circumstances under which you may consider the audit reportto be lacking and the auditor liable for financial losses suffered by stakeholders? Do you believe that the laws and regulations provide sufficient protection for the auditor carrying out his/her professional duty with due diligence and care or do you perceive an imbalance in favor of the stakeholders?

Required:

Discuss the issues outlined above in relation to the rights, responsibilities and obligations / liabilities of the auditor.