Observers of the accounting profession suggest that many courts attempt to “socialize” investment losses by extending auditors’ liability to third-party financial statement users. Discuss the benefits and costs of such a policy to public accounting firms, audit clients, and third-party financial statement users, such as investors and creditors. In your view, should the courts have the authority to socialize investment losses? If not, who should determine how investment losses are distributed in our society?
Answer to relevant QuestionsAuditors’ legal responsibilities differ significantly under the Securities Exchange Act of 1934 and the Securities Act of 1933. Briefly point out these differences and comment on why they exist. Also comment on how ...Ernst & Ernst argued that the mail rule was not relevant to its audits of First Securities since that rule only involved personal transactions of Nay and the escrow investors. Do you agree? Why or why not?As a general rule, do you believe that “professionals” should be compensated for the overtime they work? Defend your answer.What are the key conditions or circumstances that must be present for a company to be “auditable”? What uncommon challenges to “audit ability” are posed by Chinese companies?Identify the specific risks that the Somalia engagement posed for PwC as a firm. Do you believe that PwC properly considered and mitigated each of those risks? Explain.
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