This Court’s Ruling Puts The Opinion In Auditor’s Internal Control Opinion

A brief ruling issued this week by U.S. District Court Judge James C. Mahan makes it clear that an auditor isn’t always liable even when a subsequent auditor uncovers fraud.  In Oaktree Capital Mgmt., L.P. v. KPMG, 2014 U.S. Dist. LEXIS 106538 (D. Nev. 2014), the plaintiffs had purchased notes issued by a company that

Questions About Third-Party Confirmations Of Accredited Investor Status

Countless memoranda and alerts have been issued about the SEC’s adoption of rule amendments eliminating the prohibition against general solicitation and general advertising in Rule 506 and Rule 144A offerings.  Congress ordered the SEC to adopt these amendments as part of the Jumpstart Our Business Startups Act, or JOBS Act.   Issuers that wish to engage in general solicitation take “reasonable

Grand Theft Auto Meets The Sarbanes-Oxley Act

Arthur Andersen was one of the many casualties of the collapse of Enron Corporation.  In 2002, a jury found the once well respected firm guilty of violating 18 U.S.C. §§ 1512(b)(2)(A) and (B).  These sections make it a crime to “knowingly use intimidation or physical force, threaten, or corruptly persuade another person . . .

Accountant’s Defamatory Report To Audit Committee Held To Be Absolutely Privileged

Once upon a time, an independent accounting firm learned from a law enforcement source that its publicly traded client and two of its directors had committed illegal acts of a serious nature.  The accounting firm contacts the source who advises against further dissemination of the report.  Nonetheless, the accounting firm decides to report the matter

California’s Oversight Of Accountants

Yesterday, Broc Romanek wrote in his blog about the Public Company Accounting Oversight Board’s announcement of settled disciplinary actions against three accountants.   In California, accountants are regulated by the California Board of Accountancy. California’s Board currently regulates over 81,000 licensees, which the Board claims is the largest group of licensed accounting professionals in the nation.  One would expect

Are Your Secrets Safe With Your Accountant?

The California Board of Accountancy is over 100 years old, having been established in 1901.   In California, the accountants are governed by the Accountancy Act, which can be found in the Business and Professions Code (commencing with Section 5000) and regulations adopted by the Board, which can be found in Title 16, Division 1 of

Are Reverse Mergers A Nevada Problem?

Yesterday, the Securities and Exchange Commission issued this bulletin on the risks of investing in reverse merger companies.  In this post from the week before, I wrote about a recent article that found that Nevada is second only to Delaware in attracting out-of-state publicly traded corporations.  The article by Professors Michal Barzuza and David C. Smith looked at the

Restatements Reported To California Board On Downward Trend Overall

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On June 30, 2002, President Bush signed the Sarbanes-Oxley Act into law (for a trip down memory lane, you can read Broc Romanek’s post reporting that momentous event here).  Less than a month later, Governor Gray Davis signed AB 270 (Correa) into law.  AB 270, one of several California laws enacted in the wake of