Refer to the Professional Judgment in Context feature at the outset of the chapter, which features the litigation charges against KPMG for its audit failures during the subprime mortgage crisis.
a. How does the business environment affect the litigation risk faced by audit firms?
b. Should auditors be held liable if their client's business fails or if the financial statements contain a fraud that the auditors did not detect?
c. What defenses do auditors use in response to litigation?
d. What actions can auditors take to minimize litigation exposure?