Question: Kaufman Kaufman conducted an audit of Brady MVP Co

Kaufman & Kaufman conducted an audit of Brady MVP Co., a publicly held corporation, in which it conducted its audit wholly in accordance with the professional requirements of the PCAOB. However, during the year in question, the management of Brady MVP Co. committed fraud, and the company’s shares fell 75%. Shareholders for Brady MVP Co. brought suit against Kaufman and Kaufman for negligence, arguing that a reasonable person would have discovered the fraud if acting with due professional care.
In deliberations, the jury has come to the conclusion that they are more than 50% sure that Kaufman & Kaufman should have detected the fraud in the course of their audit work. However, they are not 100% sure that the firm is in fact negligent.
Even though they conducted the audit in accordance with PCAOB standards, can the jury still find Kaufman & Kaufman negligent? Is the jury’s level of assurance concerning the firm’s guilt sufficient to hold the firm negligent? Would your answer change if it were a criminal case?

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  • CreatedJanuary 21, 2015
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