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    Four Major Sources of Legal Liability

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    Four major sources of legal liability:

    1. Liability to clients
    2. Liability to third parties under common law
    3. Civil liability under federal securities laws
    4. Criminal liability

    Fully examine and present the topic
    Fully compare and contrast the topic to pre and post Sarbanes-Oxley
    Fully explain the impact the topic has on accountants, auditors, and stakeholders in a business or industry
    Relate the topic to a real & likely situation in a business or industry
    Name the business or industry
    The key players involved in the topic/issue
    3(minimum) possible outcomes & consequences for each

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    Solution Preview

    1. Liability to clients.
    The auditor has a contractual relationship with a client. If the auditor does not perform his side of the bargain, then the client can file charges for breach of contract. When the case is tried in court, monetary damages for losses incurred may be awarded to the client. Further, specific performance may be required by the law and consequential damages that occur indirectly because of the breach will be awarded to the client (Carroll.M, & Morvillo. R, 2009).
    The client may bring charges of fraud or negligence against the auditor. The charges of fraud may lead to criminal liabilities whereas the charges of negligence may result in monetary damages. Consider the example of the energy industry. If the auditor gives an unqualified statement and the cash balance had not been verified by the auditor. The company required paying cash for laying a cable network and work was stalled leading to loss, the client may hold the auditor liable for giving an unqualified audit certificate.
    2. Liability to third parties under common law
    Before 1931 the auditors were protected against liability against ...

    Solution Summary

    This answer provides you an excellent discussion on legal liability