Distinguish Between the "Due Diligence" and the "Causation" Defenses Available

question 49

Essay

Distinguish between the "due diligence" and the "causation" defenses available to auditors under section 11 of the Securities Act of 1933.

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Definitions:

Accounting Profit

The total revenue of a business minus the explicit costs associated with that revenue, calculated using generally accepted accounting principles (GAAP).

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing for full adjustment to changes.

Short Run

In economics, a period during which at least one of a firm's inputs is fixed and cannot be changed.

Fixed Input

An input in the production process that cannot be changed in the short term, such as buildings or land.