chapter 4 auditoria

Ultramares Corporation V. Touche 1931

Auditors could be held liable for ordinary negligence to third-party beneficiaries known to be the primary users of the financial statements and other third parties for gross negligence must prove gross negligence on hte part of the auditors

Credit Alliance Corp. V. Arthur Andersen & Co. 1985

auditors must demonstrate knowledge of reliance on the financial statements by a third party for a particular purpose to be held liable for ordinary negligence to that party

Escott and Ernst V. Bar chris construction corp 1968

the first significant case brought under the securities act of 1933. The auditors were unable to establish their due diligence, especially with respect to the S-1 review for subsequent event up to the effective date of the registration statement

Ernst and Ernst V. Hochfelder et al. 1977

Established that the auditors could not be held under the rule 10b-5 of the act for ordinary negligence. The U.S supreme court concluded that the auditors’ knowledge of the fraud must be proven before damages can be recovered under this provision of the securities exchange act of 1934

Reves v. ernst young 1993

court decided accountants cannot be held liable under rico act unless they actually participated in the operation or management of the organization

United States V. Simon (continental vending) 1969

Auditors were held criminally liable for gross negligence. Two audit partners and a manager were convicted of filing false statements with a government agency, mail fraud, and violating section 32 (a) of the securities and exchange act of 1934

United States V. Arthur Andersen 2002

accused of the wholesale destruction of documents relating to the Enron corporation collapse

1136 tenants corporation V. Max Rothenberg and Company 1971

the cased demonstrated the importance of engagement letters to clearly establish an understanding with the client regarding the nature of the service to be provided. It also illustrated the need to follow up on unusual findings even when the CPAs are not performing audits

Rosenblum V. Adler 1983

auditors could be held liable for ordinary negligence to all third party that the CPAs reasonably foresee as users of the financial statements for routine business purposes

Rush Factors, Inc. V. Levin 1986

auditors were found liable for ordinary negligence to a third party not specifically identified to the auditors, although the auditors were aware of the intended use of the financial statement