1. Do you believe that auditors should be held liable for failing to discover fraud in situations such as Best, where top management goes to great lengths to fool the auditors? Explain. 2. Discuss the red flags that existed in the Best case and evaluate Ernst & Whinney’s efforts with respect to fraud risk assessment. Mintz, Steven. Ethical Obligations and Decision-Making in Accounting: Text and Cases (p. 322). McGraw-Hill Higher Education. Kindle Edition.

1.No,the Auditors should not be held liable for failing to discover the fraud.

2.The red flags in Best case are Account receivables,Current liabilities and Notes payables.

Explanation:

1. The auditors responsibility is to state if the financial statement prepared shows a true and fair view,and to vet compliance to statutory guidelines.They may detect fraud in the course of their audit,they can recommend but are not responsible to put control measures in place to prevent such. The management are responsible for the preparation of the financial statement and safeguarding of asset, consequently, liable for the content therein.

2. The sales were made on cash basis before the period in question,a major change in policy as such should have been well measured

i think the answer to your question is b. directive