Auditors' Legal Liability

Auditors' Legal Liability - reliance on plaintiff only f/s...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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    
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: reliance on plaintiff only f/s materially misstated - Burden of proof on defendant (audit firm) 1934 Act - requires the 10- Qs and 10-Ks. 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...
View Full Document

Ask a homework question - tutors are online