Final answer:
Dexter's best defense would be to argue that they performed the audit in accordance with GAAS and exercised due professional care, and they cannot be expected to detect all instances of fraud or embezzlement.
Step-by-step explanation:
Dexter's best defense in this case would be to argue that they performed the audit in accordance with generally accepted auditing standards (GAAS) and exercised due professional care. Under GAAS, auditors have a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether caused by error or fraud. However, auditors are not expected to detect all instances of fraud or embezzlement, as these activities are often well-concealed.
Furthermore, auditors are not insurers of the accuracy of the financial statements and cannot guarantee that all frauds will be detected. They may encounter inherent limitations in the audit process, such as management override of controls or collusion among employees. Therefore, Dexter could argue that they performed the audit diligently and were not negligent in failing to discover the embezzlement.
It is important to note that the outcome of this case would ultimately depend on the specific circumstances and evidence presented.