Introduction Every investor is concerned with risks that a project has before he/she decides to invest his/her money into such a project. For this to be done the services of experts in risk evaluation are sought in order to instil confidence in the person anticipating to invest in such a project. This applies mainly to companies that decide to offer their stake to the public through the initial public offer (IPO). Other businesses are disposed off as going concern and every detail of the business is supposed to be availed to the person buying such a business. Of great importance is the need to reveal some of the risks that are associated with such a business in order to enable the buyer or an investor of a certain project be prepared to face the uncertainties that may arise after he/she invests or buys such a business. Company auditors and independent auditors are therefore consulted so that they can furnish the public with correct financial statements that can help the public establish the financial position of a company. It is after the financial statements are clearly scrutinised that investors build their confidence relying on the information they get from such financial statements. Hence any misleading information in the financial statements or other vital records that are used by investors in making their judgement on whether to invest or not will put the investors fiancés at risk exposing them to contingencies that would have easily been avoided. Hence auditors are supposed to put to light every detail pertaining to risks that a company or a project may have in order to be on the safe side rather than being sorry for his/her wrongful acts of issuing false financial statements or false records. Situation Mr Stewart was been given a contract as an independent auditor in order to establish the financial position of K$L company that desires to go public through its initial public offer (IPO). Among other things the auditor was supposed to furnish the public with intensive and correct financial statements that would give the public confidence to invest in the company. However contrary to the ethics that govern auditing profession the auditor was handed a lump sum of money in order to make the company look financially stable. In addition the auditor tampered with the company’s financial statements such as the balance sheet where he exaggerated the assets figures by increasing them and lowering the value of the liabilities. He also exaggerated the profit and loss account to make the company appear profitable while this was not the real case. Due to the confidence that the public derived from the financial statements prepared by the auditors invested heavily in the company. One year down the line the company was put under receivership. Other independent auditors were called to investigate the cause of the company going down in performance after a short period of time and it was revealed that the financial statements offered were not correct. Analysis The company’s hired independent auditor misled the public about the financial position of the company hence exposing the public or investors to financial risks that had eaten into the company. The public lost huge sums of money invested in the company due to the misleading financial statements that the auditor issued. He was therefore not on the safe side because legal actions were taken against him. It is in view of this that it is better to be safe than sorry. Formulas The risk adjusted return on capital (RAROC) formula which is based on the profitability measurement pro