Professional Documents
Culture Documents
Chapter 5
Chapter 5
Chapter 5
5-1
Liability to clients, and defenses Liability to third parties, and defenses Liability from Federal securities law: Securities acts of 1933 and 1934 Criminal liability
Business failure
Audit risk
Criminal liability
Foreseen users
1933 Act : Deals only with new securities. Only original purchasers of securities may recover from auditors.
The liability of auditors under this act often centers on Rule 10b-5, p. 118.
It may apply to accountants if they intentionally or recklessly misrepresent information intended for 3rd party use.
Lack of duty
Criminal Liability
CPAs can be found guilty for criminal action under both federal and state laws. Most laws make it a criminal offense to
defraud another person through knowingly being involved with falsifications in financial statements.
The Sarbanes-Oxley Act makes it a felony to destroy or create documents to impede Or obstruct a federal investigation.