L22 Notes_Part_2 - Under what source of law was the suit...

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Critical Thinking Corner What are the sources of auditors' legal liability? How are accounting manipulations implemented? Under what source of law was the suit brought? What client characteristics are associated with future lawsuits against their auditors? What environmental characteristics are associated with auditor lawsuits?
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Legal Liability: Perspective (Lys and Watts JAR Supp. 1994) What are the sources of auditors' legal liability? 64% shareholders 19% creditors 13% clients 12% trustees 13% SEC 8% derivative suits How are accounting manipulations implemented? 57% overstatement of assets 53% overstatement of revenues 13% understatement of liabilities
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Unformatted text preview: Under what source of law was the suit brought? 48% SEC Act of 1934 18% SEC Act of 1933 22% State Law 5% RICO Legal Liability: Client Characteristics What client characteristics are associated with future lawsuits against their auditors? lower liquidity poorer stock performance higher leverage lower market to book ratio higher incident of management changes higher frequency of qualifications audited by larger firms auditors employed a less structured approach audited longer by the same firm or first year audit audit fee represents a larger part of total audit firm...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L22 Notes_Part_2 - Under what source of law was the suit...

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