[BUS 426] - Final Exam Guide - Everything you need to know! (38 pages long)

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Both the numbers of lawsuits and sizes of awards to plaintiffs remain high, including suits involving third parties under both common law and the provincial securities acts. Establishing auditor liability is not a straightforward matter. Business failure: happens when a business cannot repay its debts, due to poor management, a shift in demand, or economic factors. Audit failure: happens when the auditor issues an incorrect audit opinion (an unqualified opinion when it should be qualified) Users will often blame auditors when there is business failure, even if there has been no audit failure. Common law liability to client: client sues auditor for not discovering a defalcation ( ) during the audit. Common law liability to third parties: bank sues auditor for not discovering materially misstated financial statements. Liability under provincial securities acts: purchaser of stock on the secondary market sues auditor for not alerting the purchaser of material misstatement.

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