there's no clipping it's pretty impossible to hear this piece doing something wrong when it's being used entirely in the digital domain.
Not sure - it depends what you mean by wrong....I agree in the sense of "distortion", however an EQ introduces phase effects....often inaudible but they can be obtrusive at extreme settings...you can even get "ringing".
Furthermore an EQ does not fix an imbalance between reverberant sound fields and primary signal...like a band aid it reduces the OVERALL sound field. Some microphone analyzer systems and software can distinguish reverberant from direct sound fields (the decay)....something our ears/brain can do to a limited extent (early coherent reverberation is added to the primary sound - so it helps us hear some details that might be "masked" with out the reverb).
Ultimately it is a balance in primary and reflected sound that allows us to hear the most details.....this is what makes some auditoriums excellent and others terrible for listening, and the same can be said for an audio system in a room. The PEQ does nothing to help restore this balance even though it is a great tool.