Loose-leaf For Auditing & Assurance Services: A Systematic Approach
11th Edition
ISBN: 9781260687637
Author: William F Messier Jr, Steven M Glover Associate Professor, Douglas F Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.8RQ
To determine
Introduction: Private securities litigation Act is passed by Congress in the year of 1995 to verify and stop the filling of unwanted securities lawsuits while Securities Litigation Uniform Standards Act of 1998 is the legislative act in the U.S concerning securities fraud regarding the private class-action lawsuit.
The most significant component of Private securities litigation Act of 1995 and Securities Litigation Uniform Standards Act of 1998 concerning T v. M lawsuit. And to explain whether the ruling makes it easier or harder to hold auditors liable for fraud.
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What unfortunate lesson did the auditors learn from the situation in the Unregistered Sale of Securities case? What should auditors do when a violation of U.S. securities laws is suspected?
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What are the major differences in auditors’ liability under the Securities Act of 1933 and the Securities Exchange Act of 1934?
Chapter 20 Solutions
Loose-leaf For Auditing & Assurance Services: A Systematic Approach
Ch. 20 - Prob. 20.1RQCh. 20 - Prob. 20.2RQCh. 20 - Prob. 20.3RQCh. 20 - Prob. 20.4RQCh. 20 - Prob. 20.5RQCh. 20 - Prob. 20.6RQCh. 20 - Prob. 20.7RQCh. 20 - Prob. 20.8RQCh. 20 - Prob. 20.9RQCh. 20 - Prob. 20.10RQ
Ch. 20 - Prob. 20.11RQCh. 20 - Prob. 20.12RQCh. 20 - Prob. 20.13RQCh. 20 - Prob. 20.14MCQCh. 20 - Prob. 20.15MCQCh. 20 - Prob. 20.16MCQCh. 20 - Prob. 20.17MCQCh. 20 - Prob. 20.18MCQCh. 20 - Prob. 20.19MCQCh. 20 - Prob. 20.20MCQCh. 20 - Prob. 20.21MCQCh. 20 - Prob. 20.22MCQCh. 20 - Prob. 20.23MCQCh. 20 - Prob. 20.24MCQCh. 20 - Prob. 20.25MCQCh. 20 - Prob. 20.26PCh. 20 - Prob. 20.27PCh. 20 - Prob. 20.28PCh. 20 - Prob. 20.29P
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- What are the defenses that someone can take to charges of violations under the 1933 securities act?arrow_forward“Securities fraud’s lack of mooring in a fully developed concept of fraud produces at least three costs: public and private actions are not brought on behalf of clearly specified regulatory objectives; the line between civil and criminal liability has become unacceptably blurred, and the law has come to provide at best a weak means of resolving vital public questions about wrongdoing in financial markets” Required: - What do you mean by churning in security fraud? Discuss the various elements to prove that a registered person engaged in a churning scheme. Evaluate the concept of block order scheme used by the broker. Discuss your opinion undertaken by the fraud examiner to prove the block order scheme.arrow_forwardPlease answer the question: After the Securities Act of 1933 and Securities Exchange act of 1934, what did auditors focus on? Why was the change in focus necessary?arrow_forward
- 1)List and explain the General Standards. 2)What are the Auditor’s Liabilities under Common Law and Contract Law. 3) What are the Auditor’s Liabilities under Statutory Law (SEC Acts and Other Acts of Congress). Securities Act 1933: Securities & Exchange Act 1934: Foreign Corrupt Practices Act (1977): Private Securities Litigation Reform Act (1995/1998): Sarbanes-Oxley Act (2002):arrow_forwardWhat is the relationship between CSR and accounting fraud?arrow_forwardThe Overstock-Grant Thornton dispute was publicly aired via disclosure statements filed with the SEC. What impact do you believe those disclosures had on the investing public's confidence in the financial reporting domain and the independent audit function? Were the interactions between Overstock and Grant Thornton unprofessional or otherwise inappropriate? Explain.arrow_forward
- 5. Which of the following is true of Regulation A securities? O a. They are not subject to transfer restrictions. O b. They cannot be offered publicly even with general advertising. O c. They require a lengthy and complicated registration process. O d. They may be applied for by those who have been involved in previous securities fraud cases.arrow_forward1. What are the accounting rules for determining whether to expense certain costs against revenue versus capitalizing and depreciating the costs? How do the different treatments affect earnings? Explain the reasons for capitalizing line costs in WorldCom. Why did Cooper believe the treatment did not conform to US GAAP? 2. Analyze Cooper and the internal auditors' professional judgment. How do their actions relate to Rest's four stages of moral development? 3- How can the fraud triangle be applied to explain WorldCom's fraud?arrow_forward(Sections 302 and 906) How do the officer certification requirements help to address the risk of fraud in publicly traded organizations? What is the likelihood that a CFO who is committing fraudulent financial reporting would sign the certification falsely, and what are your reactions to that possibility?arrow_forward
- the madoff debacle case? what are the lessons? question 4:arrow_forwardWho is affected when a corporation fails to manage financial fraud risk? How can exposure to financial fraud be controlled? What role do external auditors play when assessing the risk of financial fraud in those companies in which audit work is carried out? What would you recommend to prevent external auditors from overlooking the application of tests of control and substantive tests when analyzing the financial statements of corporations?arrow_forwardThe following pertains to auditor legal liability standards under the PSLRA:a. The Reform Act requires that, in any private securities fraud action in which the plaintiff is alleging a misleading statement or omission on the part of the defendant, “the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.”90Do you believe this standard better protects auditors from legal liability than the standards which existed before the PSLRA? Explain.b. Do you believe the change in standards for auditors’ liability under the PSLRA from joint-and-several to proportional liability was a good thing? Explain.arrow_forward
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