This is part 1 of a 4-part series entitled, "Accountants' Liability: Litigation and Issues in the Financial Crisis."
The current economic crisis poses new challenges and new hazards for the accounting profession, and this course examines and analyzes the challenges and hazards.
The corporate accounting scandals earlier in the decade and the resulting Sarbanes-Oxley Act greatly changed the environment in which the accounting profession operates, altering not only the professions responsibilities but also the nature of its relationship with its clients. Now, a new wave of scandals and an economic meltdown may herald further dramatic changes. Two segments in the program address the key issues for accountants arising from the subprime credit crunch.
The past several years saw many legislative and regulatory responses to the professions role in the previous spate of corporate scandals. For example, the PCAOB is issuing inspection reports and taking enforcement action, and regulation at the state level has become more stringent. Legislative and regulatory developments are addressed in several segments of the course, including a keynote address by the Chief Counsel for the SECs accounting office, an overview of the SECs enforcement initiatives and trends, and a presentation on the special concerns of the PCAOB.
Yet, just as accounting firms have begun to adapt to these changes, there are indications that the nations regulatory structures may be revamped further. New auditing and accounting standards are being promulgated and are becoming increasingly internationalized, accompanied by a lively debate about how quickly and how thoroughly the United States should move toward principle-based rather than rule-based accounting. A special presentation by two prominent practitioners spells out the key differences between GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards).
The threat of ruinous legal liability for accounting firms continues and may be increasing due to recent revelations, even as calls continue for liability caps for the profession. The course highlights the key developments in the litigation with presentations on class actions, suits against smaller firms, SEC and PCAOB Investigations, trustee actions, damages, and causation issues.
Other segments in the course address common practice problems, such as restatements, that can generate liability exposure. A final segment of the course analyzes the important ethical issues that arise in accountants liability litigation.
Current Developments and Course Overview
One of the Planning Chairs outlines the key developments and trends that are affecting accountants liability today: Public perception of the accounting profession after Enron, and the impact of the subprime and credit crisis on public perception; the impact of financial market regulatory reforms arising out of the credit crisis on the accounting profession; the effect of Sarbanes-Oxley on the profession, including firm structure, quality control, concentration and perceptions of risk, relationships with clients, and interaction with audit committees; litigation against accountants; and internationalization and convergence of accounting standards and the implications of new standards for litigation.
Keynote Address
The Chief Counsel of the Office of the Chief Accountant of the Securities and Exchange Commission addresses current topics affecting the accounting profession
The Credit Crisis
The Executive Director of the Center for Audit Quality discusses audit and accounting issues arising in the current economic environment.
Developments on the Horizon
As if the changes in the past several years after Sarbanes-Oxley weren't enough, the next few years after the credit crunch are likely to see even more changes in accounting firm structure and regulation. Can only four firms effectively audit most public companies? What is the future of firm structure given the virtual collapse of major financial institutions, ongoing restatements, control deficiencies, and SEC proceedings and settlements? What will new financial regulators require? What other issues can the profession expect to face?
Subprime and Credit Crunch Issues
The subprime and credit crises have begun to produce claims against accounting firms, at times in staggering amounts. In this segment, a practitioner and a general counsel for an accounting firm explain how these historic economic conditions raise unique accounting, auditing, and litigation issues which are only now starting to emerge. FAS 140, 157 and 159, "mark to market," loan loss reserves, other relevant accounting and auditing standards, and current litigation are considered.
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