Fleming and Co. ,CPAs,issued an unqualified opinion on the 20X3 financial statements of Walton Corp.Late in 20X4,Walton determined that its controller had embezzled over $2,000,000.Fleming was unaware of the embezzlement.Walton has decided to sue Fleming to recover the $2,000,000.Waltons suit is based upon Fleming's failure to discover the missing money while performing the audit.Which of the following is Fleming's best defense?

Question

Quizplus · Accepted Answer

Fleming's best defense is that the audit was performed in accordance with Generally Accepted Auditing Standards (GAAS), which would imply that they exercised due professional care and followed the appropriate auditing procedures. If the embezzlement was not detected despite adhering to these standards, it could mitigate their liability.