The situation that Willis and Company, CPAs have found themselves in regarding Geiger Company’s claim that Willis was negligent, underscores the need for public accountants to provide due professional care in all their contractual obligations. The level of fault that Willis is liable for can vary depending on the circumstances and approaches taken in examining this situation. This fact will be evident when examining this case from the Known User Approach, the Securities Act of 1933, as well as the Securities Act of 1934. These differing options result in varying degrees of liability that Willis and Company or any CPA firm can be held accountable for. Known User Approach When considering Willis’s actions under this Known User Approach, the New York Court of Appeals set the precedent in handling future cases. The New York Court determined that CPAs are held liable for ordinary negligence solely to the CPA’s client and specifically identified third parties (Whittington & Pany, 2012). In order for this to be true though, it must be evident that the company, in this instance Geiger and the specifically identified third parties are listed as specific users of the audit reports (Whittington & Pany). In relation to the loss incurred by the bank loaning funds based on misstated financial statements, the same precedent holds true. The bank, as a third-party beneficiary, must have been specifically named as a known party to the use of the auditor’s report in order to have a claim to recover the loss sustained (Whittington & Pany). The New York Court of Appeals further states that the third-party must not only be known or listed in the auditor’s report as a user but the said third-party must have take some sort of action to prove the ... ... middle of paper ... ...934 also provides a greater protection to auditors as well, because it requires of proof of both misstatement and intent to cause harm as well as reduces liability proportionally. Under the Known User Approach, auditors can be liable for ordinary negligence, but the plaintiffs bringing suit must be specifically named in the statements for their allegations to be considered. These three approaches highlight the seriousness with which auditors and CPA firms should approach all established contracts in order to lessen the liability they face in carrying out their public duties. Works Cited Conahan, J., Nolette, P., & Young, A. (2003). Securities Fraud. The American Criminal Law Review. 40(2). Ps. 1041-1107. ProQuest doi: 230355736. Whittington, R., & Pany, K. (2012). Principles of auditing and other assurances (18th ed.). New York, NY: McGraw-Hill.
Andrea may decide not to inform the limited partners about the misrepresentation of Skyline Views’s financial statements; to avoid conflict, this decision permits Ed to deceive the company and limited partners. In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment. Andrea’s second option is to inform the limited partners about how misrepresentations of Skyline Views’s financial statements are permitting Ed to claim a higher management fee; this decision will fulfill her due diligence obligation to the limited partners while maintaining her integrity as a certified public accountant in supporting the American Institute of Certified Public Accountants Code of Professional Conduct.
As a partner in the public accounting firm of Deloitte & Touche. LLP. James, in this case, was responsible for this violation. First, James was no on the basis of full inspection of the subsequent discovery existing at the date of the auditor 's report. Second, he did not detect and address problems regarding Ligand Pharmaceuticals ' exclusion of certain types of returns from the evaluation of future returns. Last but not least, he did not adequately perceive the reasonableness of Ligand’s estimates of future product
Arens, Alvin A., Elder, Randall J., and Beasley, Mark S. (2012). Auditing and Assurance Services:
The principles of the AICPA Code of Conduct should guide the work that Jose and Emily do as auditors. The principles that specifically apply to this situation are Responsibilities, The Public Interest, and Due Care. CPAs have the responsibility to “exercise sensitive professional and moral judgments in all activities.” (Mintz, p. 19)
Cornell University Law School. (n.d.). 18 U.S. Code § 1348 - Securities and commodities fraud. Retrieved April 8, 2014, from Legal Information Institute: http://www.law.cornell.edu/uscode/text/18/1348
Throughout history there have been many white collar crimes. These crimes are defined as non-violent and financial-based crimes that are full ranges of fraud committed by business and government professionals. These crimes are not victimless nor unnoticed. A single scandal can destroy a company and can lose investors millions of dollars. Today, fraud schemes are more sophisticated than ever, and through studying: Enron, LIBOR, Albert Wiggan and Chase National Bank, Lehman Brothers and Madoff, we find how the culprits started there deception, the aftermath of the scandal and what our country has done to prevent future scandals.
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
Price, M. & Norris, D. (2009) White-Collar Crime: Corporate and Securities and Commodities Fraud Retrieved from www.jaapl.org
American Express Tax & Business Services, a subsidiary of the American Express Corporation acquired CPA practices all over the United States. This practice by a non-CPA firm can encourage its employees not to serve the public interest as the firm is not subjected to as many regulations as a CPA firm would be. A financial firm providing accounting services poses a conflict of interest for its CPA employees. For example, the CPA provides accounting services along with financial services like insurance sales. The CPA would be endorsing the insurance products of the company which can affect the CPA’s objectivity with respect to the product being offered to third-parties (Ponemon, 1996). The scope and nature of the services performed influence the accountant to great lengths.
His project manager, Oliver Freeman, changed the analysis. that Daniel submitted in order to get a clear opinion so that their firm may get an exclusive account. The. My decision was to report the incident so that the correct information would be supplied in the audit documents. The decision I chose may cost Baker Greenleaf to lose an important client and Oliver Freeman to lose his job, but it will uphold the integrity of the accounting profession and keep Daniel Potter safe from the liability of providing false information.
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
Introduction Within the current crisis of confidence in the public accounting profession after the Enron debacle and series of high profile failures of financial services firms, the issue of ‘audit expectation gap’ has never been more important. Though it would take an enormous amount of effort to address these issues, I will argue that tremendous amounts could be done in order to close the gap. In this essay, I will discuss some of these issues and in particular the strategies to reduce the gap. Definitions Various definitions have been proposed for the audit expectation gap.
150 Ponzi schemes collapsed in 2009 alone, resulting in more than $16 billion in losses to tens of thousands of investors. These victims confront the challenge of calculating their losses for recovery claims as well as tax purposes. Ponzi scheme investigations currently account for approximately 21% of the Securities and Exchange Commission’s (SEC’s) enforcement workload — up from 17% in 2008 and 9% in 2005
This shows how a lack of transparency in reporting of financial statements leads to the destruction of a company. This all happened under the watchful eye of an auditor, Arthur Andersen. After this scandal, the Sarbanes-Oxley Act was changed to keep into account the role of the auditors and how they can help in preventing such
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.