Liability 93 & 94 Notes:
1993 aka SEC 11
[Please “SR” did u do due diligence defense]
At the start of the company the plaintiff is worried about making a good investment. They ask the accountant to Please “SR” do you due diligence.
The plaintiff does not have to prove:
Please – Privity
“S” – Scienter
“R” – Reliance
The best defense for the accountant is to perform due dalliance.
1944 aka 10B-5
[Must prove it “SR” & not rely defense ]
Now that the company is up and running the burden of prof is now in the plaintiff. So they “must Prove it “SR” & not rely defense”
The plaintiff must prove:
Prove
“S” – Scienter
“R” – Reliance
1944 deals with FRAUD which an accountant's ROLE to avoid liability.
Deffinition of FRAUD:
F – False Rep of Fact
R – Reliance on Info
A- Awareness of False Info
U – Ultimate intent (Scienter)
D – Damages
Accountant's Liability w/ 1934:
R – Relied – plaintiff has reasonably relied on info
O – Omission Material Fact
L – Loss – Plaintiff suffered loss
E – Error – Error by accountant
Note the 1933 deals with NEGligence which and which only uses the OL in ROLE
Definition of NEG:
N – Nondisclosure – info to a client
E – Errors – found not corrected
G- GAAP – not follow GAAP
Accountant's Liability w/ 1933:
R – Relied – plaintiff has reasonably relied on info
O – Omission Material Fact
L – Loss – Plaintiff suffered loss
E – Error – Error by accountant
All these concepts are all mixed up in a web and its hard to understand which angle to approach the question. My only advice is to untangle the concepts and understand them as a stand alone, then when you do MCQ's most of the time you know the answer by just reading the question.
If it helps use it, if it's confusing ignore it. Good Luck = )
FAR - 05/2015
AUD - 75,11/2014
REG - 07/2015
BEC - 09/2015
.