Identify two ways auditors can limit their liability

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Problem - B&Y Partners (BY) is an audit firm located in Hamilton Ontario. Last year it audited DFI Inca publicly traded company. Although the company has been profitable for many years, B&Y was hired by major creditor who was considering extending a large loan to DFI. DFI has a December 31, 2016 year end.

B&Y conducted the audit and gave an unmodified opinion, dated February 1, 2017.

A group of former employees purchased $750,000 of the common stock of DFI in 2016, intending to hold the stock as a long-term investment. Unfortunately, DFI went bankrupt in 2017 .DFI had a large customer that also purchased goods from DFI throughout all of 2016.

Required -

a. Explain, with reason, the parties the auditor owes a duty of care to if any.

b. Identify at least two ways auditors can limit their liability in performing an audit of financial statements?

Reference no: EM133021546

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