Asked by Simer Sidhu on May 28, 2024
Verified
Rico, an accountant, contracts to conduct an audit for Sushi Restaurants. In performing the audit, Rico fails to detect a Sushi employee's obvious theft of funds from the firm. Rico is most likely
A) liable if a normal audit would have revealed the theft.
B) liable if the accountant failed to issue a qualified opinion with the audit.
C) not liable because a normal audit is not intended to discover fraud.
D) not liable if the theft was due to Sushi's negligence.
Obvious Theft
A situation where an act of stealing is clear and unmistakable to any observer.
Audit
A systematic examination and verification of a company's financial records, performance, or compliance with legal requirements.
Qualified Opinion
An auditor's statement that accompanies a company's financial statements, indicating that most parts of the financial statements are accurate, but there are reservations.
- Comprehend the legal and ethical consequences associated with not fulfilling contractual commitments and meeting regulatory deadlines.
Verified Answer
CD
Clara DvorakMay 31, 2024
Final Answer :
A
Explanation :
Rico would be liable if a normal audit, conducted with due diligence and according to standard auditing practices, would have revealed the theft. Audits are designed to review financial records and practices to ensure accuracy and detect fraud or theft, so failing to detect obvious theft indicates a failure in performing the audit properly.
Learning Objectives
- Comprehend the legal and ethical consequences associated with not fulfilling contractual commitments and meeting regulatory deadlines.