Auditing and Accounting Cases: Investigating Issues of Fraud and Professional Ethics 3rd Edition by Jay Thibodeau,Deborah Freier

Exercise 3

Consider an auditor?s common law liability to third parties. Describe the difference between the three levels of failure to exercise due care: ordinary negligence, gross negligence, and fraud. Based on the case information, comment on the possible level of failure that was seemingly exhibited by Friehling Horowitz. Do you believe that there are any mitigating factors to help defend the actions of the auditing firm?