Auditors' Legal Liability

Auditors' Legal Liability - reliance on plaintiff – only...

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Liability to Clients Liability to 3 rd   Parties Federal Securities  Laws Criminal Liability  Material Fraud Missed   Earnings misstated (material)      1.  F/S as a whole      2.  Reported earnings -               restatement Primarily creditors or banks Class action lawsuit - group of  shareholders or investors sue  due to materially misstated  financials Fraud- must have  knowledge and intent Most common source of  lawsuits towards CPA firms  (from your client) Ultramares doctrine - Auditors  negligent, creditors not  primary beneficiary (lack of  privity) Forseen users – if auditor  should have forseen a user,  they likely will be held liable.  1933 Act- only purchasers of      NEW  securities can sue       - No burden of proof or    
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Unformatted text preview: reliance on plaintiff – only f/s materially misstated - Burden of proof on defendant (audit firm) • 1934 Act - requires the 10- Q’s and 10-K’s. If one is materially misstated, case can be filed • Rule 10b-5: Fraud Can be found guilty under state and federal laws Defenses 1) Lack of duty to perform 2) Non-negligent performance 3) Contributory negligence 4) Absence of causal connection Defenses 1) Non-negligent performance Defenses 1) Non-negligent performance 2) Lack of duty 3) Absence of causal connection AUDITORS’ LEGAL LIABILITY...
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