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Case 5

In: Business and Management

Submitted By Mayra0128
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Textbook Assignment: 4-15, 4-17, 5-34-&5-35
Mayra Flores
ACC/497
March 10, 2016
Donald Autrey

4-15
Identify five other ways in which the Private Securities Reform Act of 1995 will potentially change auditors’ legal liability. Explain how each is of potential benefit to the auditor

1. If the auditor thinks he/she found illegal acts by management, they are require reporting it to someone in higher position other than management. Those people will need to report it to SEC within 24 hours of the notification. The Reform act clearly says the auditor will not be held accountable for any actions against the company.

2. The Reform Act makes the accuser responsible for a good portion of legal fee the defendants is charge with.

3. The Reform Act also helped auditors with limiting lawsuits. Not everyone can sue them.

4. 5.

4-17
a. Identify how the Sarbanes-Oxley Act of 2002 changed the audit environment for auditors.

The Sarbanes-Oxley Act has change the audit environment because auditors use to have certain strategies and are no longer accepted. Now, they focused on both testing controls and internal control. They also have to work with management and gives them feedback on control and internal criteria.

b. Identify and explain new liabilities for managements of public companies created by the Sarbanes-Oxley Act of 2002

Managers now have to take responsibility for many different things. This means they are responsible for financial statement and false information giving in the statement. They need to have accurate evidence to support evaluations. After, evaluations and knowing where the deficiencies are, managers must correct in time before the auditor proceed with their assessment. They just can go based on an auditor evaluation. So this gives management less room to say we were unaware.

5-34
(Risk of material…...

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