- 10 Marks
AAA – L3 – Q2 – Professional responsibility and liability
Discuss mechanisms to avoid negligence allegations for Prescilla Ltd.'s auditors.
Question
A duty of care exists where the auditors knew (or reasonably should have foreseen at the time of auditing the financial statements) that those financial statements might be relied on for that particular purpose and that it would be reasonable for such reliance to be placed for that purpose.
To avoid successful allegations of negligence, identify the key mechanisms that the auditors of Prescilla Ltd. should have followed.
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