Insights_Chpt 3,4, 14,16

Insights_Chpt 3,4, 14,16 - Company itself Shareholders and...

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BUS 129A “Insights” Insight 23: Overall, overstated income causes auditors more problems than understated income. Insight 23a : How to overstate income Asset—overstate it. Liability—understate it. Insight 23b: Not surprisingly, most liability procedures are aimed at identifying understatements Insight 24: Subsequent Event types Type 1—Condition in effect before year-end. Make adjusting entry. Type 2—Condition in effect after year-end. Add a note disclosure to the financial statements if it is important enough. Insight 25: When you think about a situation in which independence is an issue, think of the independence of the: CPA CPA firm (neither, one, or both may be independent) Insight 26: CPA common law liability (I must learn the exceptions): Client Third Parties Who is (are)?
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Unformatted text preview: Company itself Shareholders and others who have losses. CPA is Liable for Ordinary or gross negligence Gross negligence (source of most exceptions) Exceptions: Liable to Third Parties for ordinary negligence : 3 Approaches(different courts have different rules) Ultramares (Known User) Known Purpose and Known User Restatement (Foreseen User) Known Purpose Rosenblum (Foreseeable User) Foreseeable user may recover. Insight 27: CPA statute liability 33 Securities Act 34 Securities Exchange Act Who may sue? Purchasers of registered securities Security purchasers and sellers SEC form S-1 10K, 10Q CPA is Liable for Lack of due diligence Section 10Existence of scienter Section 18Lack of good faith...
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Insights_Chpt 3,4, 14,16 - Company itself Shareholders and...

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