Fraud and auditor’s liability

Generally up to 2 marks for each point explained:

– Not auditor’s primary responsibility to detect fraud unless it is material in impact on financial
statements
– Determine that the payroll fraud would have been material (include calculation)
– Reasons why fraud is hard to detect
– Audit firm may not have been sufficiently skeptical
– Non-adherence to ISAs on controls assessment and evidence obtained
– Discuss whether duty of care owed to client
– Discuss breach of duty of care
– Identify financial loss suffered and firm likely to have been negligent

Maximum marks 12