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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional liability

An audit firm wishes to reduce its exposure to claims from third parties who may see the audited financial statements. Which action is most directly aimed at limiting the firm's duty of care to those third parties?

Including a disclaimer or statement in the audit report that it is addressed solely to the company's members, with no responsibility accepted to others, most directly limits third-party duty of care. It shows the auditor did not assume responsibility to other users who might rely on the report.

  1. AIncluding a disclaimer in the audit report stating the report is prepared solely for the company's members and that the firm accepts no responsibility to othersCorrect
  2. BReducing the level of materiality used on the audit
  3. CRotating the engagement partner every year
  4. DExtending the audit fee payment terms

Explanation

A disclaimer or statement of the intended users in the report or engagement letter helps show the auditor did not assume responsibility to others. Lower materiality or rotation improve audit quality but do not limit who may claim. Fee terms are irrelevant to the duty owed.

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