ONLY A LICENSED PUBLIC ACCOUNTANT CAN AUDIT FINANCIAL STATEMENTS PREPARED FOR PUBLIC DISTRIBUTION. THE PROFESSION DEVELOPED IN ENGLAND IN RESPONSE TO THE INDUSTRIAL REVOLUTION, AND ITS GROWTH IN THE UNITED STATES WAS STIMULATED BY FEDERAL REGULATIONS, PARTICULARLY THOSE ENACTED DURING THE DEPRESSION. OUTSIDE PRESSURES FORCED PUBLIC ACCOUNTANTS TO ADOPT STANDARDS AND A CODE OF ETHICS DEFINING THEIR RESPONSIBILITIES TO CLIENTS AND THE PUBLIC. IN RECENT LAWSUITS AUDITORS HAVE BEEN CHARGED WITH FAILING IN THEIR DUTIES TO THE PUBLIC, AND IT WOULD APPEAR THAT PRESENT PROFESSIONAL STANDARDS MAY BE INADEQUATE. WITH REGARD TO THE LEGAL LIABILITY OF AUDITORS, ULTRAMARES IS THE LANDMARK CASE IN WHICH NEGLIGENCE WAS NOT CONSIDERED SUFFICIENT TO CONSTITUTE LIABILITY TO THIRD PARTIES BY AUDITORS. SOME LAWYERS, HOWEVER, FEEL THAT THIS DOCTRINE IS OBSOLETE AND THAT CLEARER STANDARDS ARE NEEDED TO MEASURE AN AUDITOR'S PERFORMANCE. ANALYSIS OF THREE LAWSUITS DEMONSTRATES THAT PUBLIC ACCOUNTING STANDARDS ARE INADEQUATE IN DEFINING THE AUDITOR'S RESPONSIBILITY TO DETECT FRAUD. FIRST, THE AUDITING FIRM SUED BY CONTINENTAL VENDING WAS CONVICTED BECAUSE OF INADEQUACIES IN THE FINANCIAL STATEMENT THEY PREPARED. SECOND, ALTHOUGH MANY OF THE LEGAL ACTIONS GENERATED BY THE WESTEC SUIT HAVE NOT BEEN CONCLUDED, A NUMBER OF VIOLATIONS OF PROFESSIONAL STANDARDS ARE INDICATED. THIRD, WHEN THE YALE EXPRESS CASE IS DECIDED, IT COULD BECOME A LANDMARK CASE ON AUDITOR'S LIABILITY AND LEGAL RESPONSIBILITIES. AREAS FOR PARTICULAR CONCERN INCLUDE DISCLOSURE OF INFORMATION AS DICTATED BY REPORTING STANDARDS, THE CONFIDENTIAL RELATIONSHIP BETWEEN AUDITOR AND CLIENT, AND THE AUDIT PERFORMANCE. THE AUDITING PROFESSION HAS MAINTAINED THAT ITS STANDARDS ARE ADEQUATE AND THE LAWSUITS HAVE RESULTED FROM INDIVIDUAL VIOLATIONS. PROFESSIONAL ASSOCIATIONS HAVE ALSO RESISTED CHANGE FOR FEAR OF HARMING AUDITORS INVOLVED IN LITIGATION. THE ASSOCIATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS SHOULD EXPAND ITS RESEARCH EFFORTS TO DETECT ACCOUNTING AND AUDITING PROBLEMS BEFORE THEY ARISE, REALIZING THAT NEW STANDARDS ARE NEEDED AND OLD ONES MUST BE REVISED. A BIBLIOGRAPHY IS PROVIDED. (MJM)