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The auditor of Woodferns Agencies, a limited liability company, is facing a legal claim for negligence. It is alleged that a fraud was perpetrated at one of the company's 80 branches, and the auditor had failed to visit that branch during his audit, since he had adopted a rotational testing approach. As a consequence the fraud had gone undetected for two years. The auditor's best defence is likely to be to produce: A. Case law judgements such as that in the Kingston Cotton Mill case which indicate that an auditor should not be held responsible for ingeniously laid frauds. B. An up-to-date letter of engagement which pointed out to the directors that the audit should not be relied on to detect all frauds which may exist. C. A written representation or other documentary evidence from the directors in which they acknowledge primary responsibility for the prevention and detection of fraud. D. Working papers showing the audit work performed supporting the view that internal control had been good and that all branches were visited over a relatively short period. |