ACCT 4150 Lecture Notes - Lecture 4: Gross Negligence, Class Action, Fiduciary
Document Summary
Grounds for suing an auditor: material misstatements or fraud that was not caught. Would rather settle to reduce publicity and fewer costs (legal fees) Class action lawsuits: multiple people involved that were affected by the fraud. Common law: been determined by historical court cases ex. Gross negligence: higher level of breach of fiduciary duties. Confidential information: not allowed (as an auditor) to disclose information outside of audit. Insider information: more knowledge than is available to public. Trying to benefit from insider information is a criminal act. Deep-pocket theory: auditors sometimes gets sued even if they aren t involved because people think they have a lot of money. Fewer requirements by the sec but an audit is still required. Lack of professional skepticism, due diligence, and due care. Identify timing, nature, and extent of procedures to be performed. Must seal work papers after audit is completed. Pcaob must state findings and reason for revocation of cpa license and practice.
