responsibilities in an ethical manner, yet they may get off easy because others were also involved in the fraud. Ask students whether this may create an environment where auditors are less likely to go the extra mile to ferret out fraud. Proportional liability liability reduces accountants’ exposure. There is no evidence have been less diligent since passage of the PSLRA. It would seem unprofessional to approach difficult issues with a client in an audit of financial statements with an attitude that since our liability is limited, we can give this one to the client. Auditors have to apply appropriate standards before making such a decision including the assessment of materiality. [An interesting paper by Kaplan and Williams on role in securities lawsuits that can auditors’ expand the discussion is: It can be Do Auditors Matter in Securities Class Action Lawsuits? found at: http://www.isarhq.org/2013_downloads/PosterSession_10.pdf] Optional Question Explain the legal liability of auditors under SEC regulations and the ruling Tellabs relied on by the Court. Include in your discussion how scienter is determined. Do you agree with the that the Deloitte auditors did not violate commission’s conclusion their legal obligations to shareholders? Why or why not? In in which the Court prescribed the following analysis for Rule 12(b)(6) motions to Tellabs, dismiss Section 10(b) actions:
responsibilities in an ethical manner, yet they may get off easy because others were also involved in the fraud. Ask students whether this may create an environment where auditors are less likely to go the extra mile to ferret out fraud. Proportional liability reduces accountants’ liability exposure. There is no evidence have been less diligent since passage of the PSLRA. It would seem unprofessional to approach difficult issues with a client in an audit of financial statements with an attitude that since our liability is limited, we can give this one to the client. Auditors have to apply appropriate standards before making such a decision including the assessment of materiality. [An interesting paper by Kaplan and Williams on auditors’ role in securities lawsuits that can expand the discussion is: Do Auditors Matter in Securities Class Action Lawsuits? It can be found at: http://www.isarhq.org/2013_downloads/PosterSession_10.pdf] Optional Question Explain the legal liability of auditors under SEC regulations and the Tellabs ruling relied on by the Court. Include in your discussion how scienter is determined. Do you agree with the commission’s conclusion that the Deloitte auditors did not violate their legal obligations to shareholders? Why or why not? In Tellabs, in which the Court prescribed the following analysis for Rule 12(b)(6) motions to dismiss Section 10(b) actions:
Ethical-Obligations-and-Decision-Making-in-Accounting--Text-and-Cases-3rd-Edition-Mintz,-Morris-Solution-Manual.docx