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A material fraud was discovered at Conner, a limited liability company, shortly after the auditor had presented an unmodified audit opinion to the annual general meeting. His standard letter of engagement indicated that he would plan the audit so as to have reasonable expectation of detecting material misstatements in the financial statements resulting from irregularities or fraud, but also stated that the primary responsibility for the prevention and detection of fraud lay with management. Which of the following statements most accurately reflects the likelihood of the auditor being held liable for the failure to find the fraud? A. He is unlikely to be held liable because the engagement letter specifically stated that management were responsible for the prevention and detection of fraud. B. He is highly likely to be found liable because his engagement letter accepted specific responsibility to find material misstatements. C. He is likely to be found liable if he found indications of a possible fraud but dismissed them as immaterial. D. He is likely to be found liable because he has a duty to detect material misstatements. |