Final answer:
Certified Public Accountants are legally permitted to act as external auditors. They are responsible for auditing financial statements and ensuring their accuracy according to GAAP. Expected audits and probabilities of being audited can be calculated based on audit frequency and risk assessments.
Step-by-step explanation:
The professionals permitted by law to serve as external auditors are Certified Public Accountants (CPAs). CPAs have the authority to audit financial statements and issue opinions on their accuracy and compliance with generally accepted accounting principles (GAAP). The role of an external auditor is crucial in maintaining public trust in the financial reporting of companies.
Let's look at a business scenario regarding audit expectations and probabilities: d. If a company assesses audit risk over a 20-year period, the expected number of audits will depend on the frequency defined by the company's policy or regulatory requirements. e. The probability that a person is not audited at all will depend on the inherent risk and controls in place. If the chance of being audited each year is fixed, it's possible to calculate this probability using statistical methods. f. Similarly, the probability that a person is audited more than twice can be determined if the likelihood of an audit in any given year is known, which then can be applied to binomial or Poisson distribution models.