Question 1

The Private Securities Litigation Reform Act of 1995 changed the legal climate in the U.S.in a major way.Explain the nature of the changes under the PSLRA with respect to legal liability.Do you believe this act adequately protects shareholders and other third parties that might bring a lawsuit actions auditor and other defendants? Why or why not?

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Question 2

A student states that as long as the auditor has followed all applicable laws, then the auditor has been ethical.Do you agree? Why or why not?

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The answer of A student states that as long as...

Question 3

Explain the accounting issues involved and ethical lapses in one of the following two cases: (a) Equity Funding or (2) Crazy Eddie.

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Question 4

Is insider trading always unethical? If you answer that it is explain why such an action violates ethical standards.If you say that it is not, explain why such an action does not violate ethical actions.

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Question 5

Auditors may be held liable to both their clients and third parties under common law.
a.What must a client prove to recover its losses from a client under common law?
b.What must an ordinary third party prove to recover losses from an auditor under
common law?
c.How does an auditor's ethical obligations and liability under common law intersect?

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Question 6

Distinguish between an auditor's legal liability under the Securities Act of 1933 and the Securities and Exchange Act of 1934.

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Question 7

Which of the provisions of the Sarbanes Oxley Act do you think is the most important? Why did you choose that particular provision?

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Question 8

The SEC v.Zurich Financial Services case dealt with:
A)Zurich's use of finite reinsurance transactions to inflate improperly financial performance
B)Zurich's use of false insurance invoices to inflate revenues
C)Failure of Zurich's board of directors to carry out its fiduciary duties
D)Failure of the auditors to exercise the degree of care and professional skepticism expected in an audit
Essay Questions

Accepted Answer

The case involved Zurich Financial Services using finite reinsurance transactions to improperly inflate their financial performance, which was the focus of the SEC's investigation.

Question 9

Distinguish between an auditor's legal liability under common law and statutory law.Cite specific cases to support your Answer.

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Question 10

The Jacobs v Coopers & Lybrand case deals with the issue of just how egregious an accounting firm's failure to comply with GAAS and GAAP have to be to subject that firm to a fraud claim arising out of its audit of financial statements.Describe the facts of the case and evaluate the plaintiffs' alleged violations by Coopers with respect to GAAS and GAAP.

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Question 11

Do you think there can ever be enough laws on the books to reduce or eliminate unethical actions that have lead to the many lawsuits discussed in the chapter? Why or why not?

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Question 12

What are the best defenses that an auditor can use to defend oneself against charges of fraud? How does ethical behavior relate to these defenses?

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Question 13

Explain the duty of care of managers and directors.Include in your explanation the role of ethics in making decisions that support such a level of care.

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Quiz 6: Legal and Regulatory Obligations in an Ethical Framework