AUDITOR LIABILITY: A REVIEW OF RECENT CASES INVOLVING GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND GENERALLY ACCEPTED AUDITING STANDARDS (original) (raw)

Research in Accounting Regulation, 2003

Abstract

ABSTRACT The Securities and Exchange Commission (SEC), the primary regulatory body that oversees the operations of the financial markets, requires that publicly-traded companies be subject to an annual audit – a set of procedures designed to determine whether a firm’s financial statements fairly comply with generally accepted accounting principles (GAAP). When performing audits, auditors use generally accepted auditing standards (GAAS) as guidelines in determining the amount of evidence to gather and to what degree the client’s accounting system may be relied upon.Since investors and their advisors rely on audited financial statements to make investment decisions, auditors have a significant impact on the financial community and capital markets. Accordingly, auditors must be diligent in the execution of their duties. However, notwithstanding the high level of care exercised by most auditors, sometimes misleading or erroneous information is released to the investing public, and this article focuses on recent case law dealing with the auditor liability that attaches in such situations.

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