Nixon and Co., CPAs, issued an unmodified opinion on the 2013 financial statements of Madison Corp. These financial statements were included in Madison’s annual report and Form 10-K filed with the SEC. Nixon did not detect material misstatements in the financial statements as a result of negligence in the performance of the audit. Based upon the financial statements, Harry purchased stock in Madison. Shortly thereafter, Madison became insolvent, causing the price of the stock to decline drastically. Harry has commenced legal action against Nixon for damages based upon Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. What would be Nixon’s best defense to such an action? Explain.
Answer to relevant QuestionsDistinguish between legal and illegal insider trading. Evaluate the ethics of the practice.The following quotation was in the court ruling in the case of the Public Employees’ Retirement Association of Colorado v. Deloitte & Touche, LLP:It is not an accountant’s fault if its client actively conspires with ...1. Evaluate the ethics of trading on client securities by Klein, given that he was an employee benefits specialist on the audit.2. Did Klein’s actions violate any rules of conduct in the AICPA Code? Why or why not?3. Do ...1. Why do you think it is important for a reinsurance transaction to transfer risk in order for a company to obtain the benefits of reinsurance accounting? Discuss the accounting and legal issues behind such a requirement.2. ...Comment on the statement that what a company’s income statement reveals is interesting but what it conceals is vital.
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