A CPA has been hired to audit a bank that is regulated by the federal banking authorities.This audit will be submitted by the bank to numerous readers,including federal regulators.The CPA's audit agreement with the bank provides that the bank will "reimburse and indemnify it for all losses it incurs if the bank's financial statements were prepared by the bank in a manner that was misleading or fraudulent." This provision:

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The provision in the audit agreement potentially violates the Acts Discreditable rule because it may limit the CPA's responsibility for misstatements or fraud that are within their control or due to their own negligence. The CPA has a professional responsibility to ensure the accuracy and integrity of the financial statements, and a provision that shifts responsibility to the bank may not be appropriate. However, it is possible that the provision could be deemed reasonable and appropriate if the CPA takes appropriate steps to ensure the accuracy of the financial statements and there is no evidence of misconduct or fraud. Ultimately, the appropriateness of the provision would depend on the specific circumstances and the overall reasonableness of the audit agreement.

A CPA Has Been Hired to Audit a Bank That