Neil Gonzales, ACCT 470-V2WW, Assignment 2-3 Final

Neil Gonzales, ACCT 470-V2WW, Assignment 2-3 Final - Neil...

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Neil Gonzales Assignment 2-3 Auditor's Legal Liability to Third Parties 20 points Due: May 15 Chapter 20: Review Question 20-1. P. 709 Briefly describe the four stages of the auditor dispute process. The four stages of the auditor dispute process are: “The occurrence of events that result in losses for users of financial statements. The investigation by plaintiff attorneys before filing suit to link the user losses with allegations of material omissions or misstatements of financial statements. The legal process that commences with the filing of the suit. “The first stage includes events that result in losses, such as client bankruptcy, financial distress, fraudulent financial reporting and misappropriation of assets. The second stage pre-suit investigation, may involve investigation activities by plaintiffs and their attorneys before initiating legal proceedings… The legal process makes up the third stage. The stage involves activities such as filing of complaints, discovery, trial preparation, and the trial. The last stage involves the resolution of the dispute, which may include a summary judgment, a settlement to avoid or discontinue litigation, or a court decision on appeal after a trial” (Messier et al., 2010, p. 685). Review Question 20.-2. P. 709 What is meant by proportional liability ? Contrast this legal doctrine with the doctrine of joint and several liability. Proportionate liability is “where each defendant is liable solely for the portion of the damages that corresponds to the percentage of responsibility of that defendant” Rulings by the Under the doctrine of joint and several liability , “the auditor can be responsible for the entire loss even if other parties contributed to the loss” (Messier et al., 2010, p. 709). Review Question 20-3. P. 709
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For what types of actions are auditors liable to a client under common law? Why would the client prefer to sue the auditor for a tort action rather than for a breach of contract? According to Messier et al. (2010), an auditor, under common law, would be held liable to a client for breach of contract, negligence, gross negligence/constructive fraud, and fraud. The client would prefer to sue the auditor for a tort action rather than for a breach of contract because “larger legal damage assessments for a tort than for a breach of contract” (Messier et al., 2010, p.
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Neil Gonzales, ACCT 470-V2WW, Assignment 2-3 Final - Neil...

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