Auditing & Assurance Module

A claim that a party to the contract did not preform in the manner prescribed in the contract.

a defense available to auditors who can show that a plaintiff's economic loss was caused by a factor other than failure to exercise the appropriate level of professional care or breach of contract

a group of plaintiffs that come together in legal action

letter issued by auditors to underwriters of securities that provides an opinion the fairness of the fairness of the issuers' financial statements.

Liability for injuries that is based on reasons other then violation of written law or statute. under common law, legal precedent is used in assessing the degree of the responsibility or fault of the parties.

a failure to provide any care in fulfilling a duty owed to another including a reckless disregard for the truth.

a legal defense theory in which the plaintiff's own failure to preform with the appropriate level of professional care bars recovery from auditors.

situations in which lawsuits may be brought against auditors not because they are necessarily at fault, but because they are the only part with resources against which recovery can be made.

the difference between the actual work and assurance required by GAAS and the expectation of that work by the general public

SEC staff reports that express new rules and policies about disclosures

a wide range of individuals or organizations or organizations that might rely on auditors' work

a limited class of individuals or organizations that could be reasonably expected to rely on auditors' work

financial statements and related disclosures provided by the public companies on an annual basis under the securities acts.

financial statements and related disclosures provided by the public companies on a quarterly basis under the securities act.

misrepresentation of fact that an individual knows to be false

breach of duty owed to another party due to lack of minimal

the initial issuance of securities

the legal doctrine that when multiple defendants are named, the full amount of a damage award may be collected from any of the defendants named in the lawsuit, even though they may be only partially at fault

a form of organizations adopted by most large accounting firms that combines the advantages of a traditional partnership with the liability protection afforded to corporations.

unintentional breaches of duty owed to another due to a lack of reasonable care

the person or organization that initiates a lawsuit.

situations in which parties have a contractual relationships

a person named in a contract for whom the services provided are intended who is known to auditors by name

payments by a convicted defendant based on a share of the court's damage award that is proportional to the degree of fault determined by a judge and jury

a legal document offering securities for sales that includes the terms of the issue, name of the issuer, planned use of the proceeds, and historical statements

contains requirements relating to all business, analytical, and supplementary financial disclosures other then financial statements themselves

Contains accounting requirements for annual and interim financial statements filed under both the securities Act and the SEC

doctrine that holds blameless a person who acts in good faith. the burden of proof that the defendants did not act in good faith lies with the plaintiff

intent of knowledge of inappropriate actions prior to committing those actions (for example, auditors knowledge of a misstatement in the financial statements and the international failure to disclose this misstatement in their reports)

unofficial but important interpretations of regulation S-X and regulation S-K by SEC staff

liability that is based on violations of written laws or statutes

civil complaint that the action of one person caused injury (personal or financial) to another; such action against auditors is normally initiated by users of financial statements

established auditors liability to clients for breach of contract

third parties not in privity with auditors have rights to bring legal action; auditors are generally not liable to third parties not in privity for ordinary negligence but could be liable for gross negligence

Auditors could be liable for ordinary negligence to primary beneficiaries

Auditors could be liable for ordinary negligence to forseen parties (restatement of torts doctrine)

Auditors could be liable for ordinary negligence to forseeable parties

Confirmed auditor liability for ordinary negligence to investors under the Securities Act; Establsihed importance of auditors' review of subsequent events

Confirmed auditors' liability to shareholders under the Securities Exchange Act if scienter is demonstrated; Provided potential exposure to auditors for gross negligence, even in absence of scienter

CLIENT prove economic loss caused by breach of contract or failure to exercise professional care. Offense - ordinary, gross negligence or fraud. Defense - causation, contributory negligence. THIRD PARTIES prove loss caused by material mistatement in financial statements and failure to exercise professional care. Offense - ordinary (depends on jurisdiction), gross, fraud. Defense - lack of standing, causation, due diliegence (work performed in accordance with GAAS).

PURCHASERS OF SECURITIES IN INITIAL REGISTRATION - prove economic loss, material misstatemetns in financial statements. Offense - Ordinary, gross, fraud. Defense - due diligence (work performed in accordance with GAAS), causation.

PURCHASERS AND SELLERS OF SECURITIES THROUGH SUBSEQUENT TRANSACTIONS - prove economic loss, material misstatments in financial statement, loss caused by reliance, auditors were aware of and acted with scienter (intent). Offense - gross negligence, fraud. Defense - auditors acted in good faith, auditors had no knowledge of material misstatements