Final answer:
Dexter's best defense in the lawsuit is lack of knowledge or negligence, arguing that they followed auditing standards and performed the audit with reasonable care. Dexter can also claim that the embezzlement was not material and had no significant impact on Bart Corp's financial position. Lastly, Dexter can argue that they had no reason to suspect or discover the embezzlement.
Step-by-step explanation:
Dexter's best defense in this situation would be the defense of lack of knowledge or negligence. As an auditor, Dexter has a duty to exercise due professional care in carrying out the audit. However, if Dexter can prove that they followed the generally accepted auditing standards and performed the audit with reasonable care, they may not be held liable for the embezzlement that was not detected.
Furthermore, Dexter can argue that the embezzlement was not material to the financial statements and did not have a significant impact on the overall financial position of Bart Corp. Materiality is an important concept in auditing, and if the amount embezzled was not considered material, Dexter may have a stronger defense.
Lastly, Dexter can argue that they had no reason to suspect or discover the embezzlement. If the treasurer took deliberate steps to conceal the embezzlement and there were no red flags or suspicious activities that would have alerted Dexter during the audit, they may not be held responsible for the missing money.