Luca, a newly licensed certified public accountant, performed an audit for ABC Corporation. Shortly after the audit, a number of company officials were indicted for fraud. Luca tells his boss, Olivia, that he is not concerned because he had no duty under GAAS or GAAP to detect fraud and that so long as those obligations were met, he had no duty to do more. He says that auditors are not expected to have perfect judgment. Set forth what the initials GAAS and GAAP represent. Additionally, discuss whether Luca is correct on the following issues, and why or why not:
1. His contention regarding compliance with GAAS and GAAP completely satisfying auditing obligations.
2. His contention regarding the obligation of auditors in relation to fraud.
3. His contention that auditors are not required to have perfect judgment.

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The Answer of Luca, a newly licensed certified public accountant, performed an audit for ABC Corporation. Shortly after the audit, a number of company officials were indicted for fraud. Luca tells his boss, Olivia, that he is not concerned because he had no duty under GAAS or GAAP to detect fraud and that so long as those obligations were met, he had no duty to do more. He says that auditors are not expected to have perfect judgment. Set forth what the initials GAAS and GAAP represent. Additionally, discuss whether Luca is correct on the following issues, and why or why not:
1. His contention regarding compliance with GAAS and GAAP completely satisfying auditing obligations.
2. His contention regarding the obligation of auditors in relation to fraud.
3. His contention that auditors are not required to have perfect judgment.

Luca, a Newly Licensed Certified Public Accountant, Performed an Audit