2. Explain why the failure of financial statement users to differentiate among business failure, audit failure, and audit risk has resulted in lawsuits 3. Use the primary legal concepts and terms concerning accountants' liability as a basis for study ing legal liability of auditors 4. Describe accountants' liability to clients and related defenses 5. Describe accountants liability to third parties under common law and related defenses 6. Describe accountants' civil liability under the federal securities laws and related defenses 7. Specify what constitutes criminal liability for accountants 8. Describe what the profession and the individual CPa can do and what is being done to reduce the threat of litigation Chapter 6: Audit Responsibilities and Objectives Objectives After studying this chapter, you should be able to 2. Distinguish management's responsibilities for preparing financi T 1. Explain the objective of conducting an audit of financial statemen statements from the auditor 's responsibilities for verifying those financial statement 3. Explain the auditor's responsibility for discovering material misstatements 4. Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit 5. Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts 6. Distinguish among the five categories of management assertions about financial information 7. Link the six general transaction- related audit objectives to the five management assertions 8. Link the nine general balance-related audit objectives to the five management assert 9. Explain the relationship between audit objectives and the accumulation of audit evidence2. Explain why the failure of financial statement users to differentiate among business failure, audit failure, and audit risk has resulted in lawsuits. 3. Use the primary legal concepts and terms concerning accountants’ liability as a basis for studying legal liability of auditors. 4. Describe accountants’ liability to clients and related defenses. 5. Describe accountants’ liability to third parties under common law and related defenses. 6. Describe accountants’ civil liability under the federal securities laws and related defenses. 7. Specify what constitutes criminal liability for accountants. 8. Describe what the profession and the individual CPA can do and what is being done to reduce the threat of litigation. Chapter 6: Audit Responsibilities and Objectives Objectives After studying this chapter, you should be able to: 1. Explain the objective of conducting an audit of financial statements. 2. Distinguish management's responsibilities for preparing financial statements from the auditor's responsibilities for verifying those financial statements. 3. Explain the auditor's responsibility for discovering material misstatements. 4. Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit. 5. Describe why the auditor obtains a combination of assurance by auditing classes of transactions and ending balances in accounts. 6. Distinguish among the five categories of management assertions about financial information. 7. Link the six general transaction-related audit objectives to the five management assertions. 8. Link the nine general balance-related audit objectives to the five management assertions. 9. Explain the relationship between audit objectives and the accumulation of audit evidence