Smith and Company,CPAs,performed the Audit Work for a Large Corporation

question 50

Essay

Smith and Company,CPAs,performed the audit work for a large corporation in connection with its registration statement.Smith and Company performed the work according to all appropriate professional standards,but the corporation had cleverly made the inventory look much greater than it actually was.Because the company did not have as much inventory as was indicated on the financial statements,the company was worth much less than it appeared to be.Smith and Company has been named in a lawsuit under Section 11 of the Securities Act of 1933.Even though Smith and Company properly performed the audit,and the fraud on the part of the corporation was such that it would not be uncovered by an audit,Smith and Company cannot prove any of this in court because all of its audit working papers and computer documentation was accidentally shredded.Discuss Smith and Company's legal situation.

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Definitions:

Non-native Species

Species that have been introduced into an environment where they are not naturally found, often leading to ecological disruptions.

Invasions

The act of entering a place in large numbers, especially when involving a change in the ecosystem by non-native species, or the act of military forces entering another country.

Prairie Pothole Region

An area in North America characterized by thousands of shallow wetlands, significant to North American migratory waterfowl.

Wetlands

Areas of land that are saturated with water, either permanently or seasonally, characterized by distinct ecosystems with specific types of plants and animals.