louwers3eMODC - MODC-1 Module Objectives 1. 2. 3. 4. 5. 6....

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Module Objectives 1. Identify and describe auditors’ exposure to lawsuits and loss judgments 2. Specify the characteristics of auditors’ liability under common law and cite some specific case precedents. 3. Identify auditors’ liability to third parties under common law. 4. Specify the civil and criminal liability provisions of the Securities Act of 1933. 5. Specify the civil and criminal liability provisions of the Securities Exchange Act of 1934. 6. Understand recent developments that affect auditors’ liability to clients and third parties. MODC-1
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The Legal Environment MODC-2
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Sources of Auditor Liability Common law: Uses legal precedent to identify faculty and responsibility. Clients Nonshareholder third parties Statutory law: Based on violations of written statutes. Shareholders
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Common Law Breach of contract Tort liability: Obligation based on failure to exercise appropriate level of professional care Ordinary negligence is lack of reasonable care Gross negligence is lack of minimal care (similar to constructive fraud) Fraud is a misrepresentation of fact an individual knows to be false
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Common Law Liability: Clients Breach of contract Failure to perform the audit in accordance with engagement letter Tort liability Liable for Ordinary Negligence, Gross Negligence, and Fraud
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This note was uploaded on 04/08/2010 for the course AEM 4530 taught by Professor Lewis during the Spring '10 term at Cornell University (Engineering School).

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louwers3eMODC - MODC-1 Module Objectives 1. 2. 3. 4. 5. 6....

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