Overview
Superior Wholesale Corporation planned to purchase Regal Furniture, Inc., and wished to deter-mine Regal’s net worth. Superior hired Lynette Shuebke, of the accounting firm Shuebke Delgado, to review an audit that had been prepared by Norman Chase, the accountant for Regal. Shuebke advised Superior that Chase had performed a high-quality audit and that Regal’s inventory on the audit dates was stated accurately on the general ledger. As a result of these representations, Superior went forward with its purchase of Regal.
After the purchase, Superior discovered that the audit by Chase had been materially inaccurate and misleading, primarily because the inventory had been grossly overstated on the balance sheet. Later, a former Regal employee who had begun working for Superior exposed an e-mail exchange between Chase and former Regal chief executive officer Buddy Gantry. The exchange revealed that Chase had cooperated in overstating the inventory and understating Regal’s tax liability. Using the information presented in the chapter, answer the following questions.
- If Shuebke’s review was conducted in good faith and conformed to generally accepted accounting principles, could Superior hold Shuebke Delgado liable for negligently failing to detect material omissions in Chase’s audit? Why or why not?
- According to the rule adopted by the majority of courts to determine accountants’ liability to third parties, could Chase be liable to Superior? Explain.
- Generally, what requirements must be met before Superior can recover damages under Sec-tion 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5? Can Superior meet these requirements?
- Suppose that a court determined that Chase had aided Regal in willfully understating its tax liability. What is the maximum penalty that could be imposed on Chase?
1- ***Debate This:
Only the largest publicly held companies should be subject to the Sarbanes-Oxley Act.
***The 4 questions are not required to be responded. The most important part is to read the above statement in boldface, take a position whether you agree or not and have 3 arguments supporting your position. Please take a look on the attachment because the debate has to be based on chapter (CH 40)***
2- ***The attached picture is a debate from a classmate. Please read his debate and write a reply in a few statements to him.
Quote
The goal is to develop your critical thinking and analytical skills. I do not want you just to say because it is unfair or simply repeat the law. The answer cannot be because the statute says so. I want you to EVALUATE it. What are the public policy reasons behind your answer? Why this specific proposition is or is not a beneficial, efficient, or positive position to take? I want to see 3 arguments supporting your answer. You do not have to answer the questions. You MUST DEBATE the prompt.