Wednesday, May 19, 2010
Required Text for Business Law II - Fall 2010
The required text for Business Law II (Custin)- Fall 2010 is: Business Law Principles for Today's Commercial Environment, Twomey & Jennings, 3rd Edition, South-Western (2011), ISBN: 978-0-324-78669-9. This is not the text used in previous semesters. You may obtain and use the electronic edition, if available.
Monday, December 7, 2009
Important ! We need to reschedule today's class.
Today's (Monday December 7 2009) Business Law II class is canceled- Business Law I classes will meet. We will reschedule today's class and discuss details on Wednesday. Rick Custin
Wednesday, December 2, 2009
Monday, November 30, 2009
Case 27-3 Great Neck Capital
- Fact: Harnischfeger’s external auditor was PwC. They had PwC review their financial condition and advised them that their information conformed with GAAP.
- However after some year end transactions; largest order included fine paper machines in Indonesia resulting in a 600 million dollar order.
- Company subsequently went bankrupt.
- Issue: Whether PwC, or outside auditor, can be held liable under sections 10B and rule 10B-5. Can they be a primary violator?
- Rationale: The court referenced a prior case, Central Bank of Denver. To support the rationale for this case, “an accountant liability for aiding and abetting is hard to distinguish from primary liability.” This rationale supports the Central Bank ruling therefore PwC cannot be held liable under S10(b) but can be held liable for statements in the audit report.
- Conclusion: PwC’s motion to dismiss granted in part and denied in part.
Monday, November 23, 2009
Happy Thanksgiving!
Please have a Happy Thanksgiving!! Take care- and stay safe! See you on Monday! Rick
Chapter 11 Case 1
Chapter 11 Case 1
Facts:
-Credit Alliance provided financing to LB Smith
-Credit Alliance told Smith that before they extended financing they would have to to examine audit financial statements
-Smith provided Credit Alliance with its consolidated financials
-contained an auditors report prepared by Arthur Anderson saying it was in accordance with GAAP and GAAS(standards)
-Credit Alliance relied on these statements and provided substantial funding to Smith
-1980- Smith filed a petition for bankruptcy
-had already defaulted on several millions of dollars of credit obligations to CA
-1981- CA sued for damages on outstanding loans to Smith
-CA claimed negligence and fraud by Andersen in the preparation of the audit reports
-Said that Andersen knew (or should have known) that the statements were used by smith to receive credit
Issue: Whether Smith can rely on the financial statements audited by Andersen. Whether there is privity of contract between Credit Alliance and Arthur Andersen
Rationale: (1) the accountants must have awareness that the financial reports were to be used for a particular purpose (2) in the furtherance of which a known party was intended to rely and (3) there must have been some conduct on the part of the accountants linking them to that party which evinces the accountants’ understanding of that parties reliance
There was no allegation, Andersen had direct dealings with Credit Alliance
Conclusion: CA fell within the exception to the general rule that requires privity to maintain an accounting against an accountant for negligence. The dismissed the charges against Andersen
Facts:
-Credit Alliance provided financing to LB Smith
-Credit Alliance told Smith that before they extended financing they would have to to examine audit financial statements
-Smith provided Credit Alliance with its consolidated financials
-contained an auditors report prepared by Arthur Anderson saying it was in accordance with GAAP and GAAS(standards)
-Credit Alliance relied on these statements and provided substantial funding to Smith
-1980- Smith filed a petition for bankruptcy
-had already defaulted on several millions of dollars of credit obligations to CA
-1981- CA sued for damages on outstanding loans to Smith
-CA claimed negligence and fraud by Andersen in the preparation of the audit reports
-Said that Andersen knew (or should have known) that the statements were used by smith to receive credit
Issue: Whether Smith can rely on the financial statements audited by Andersen. Whether there is privity of contract between Credit Alliance and Arthur Andersen
Rationale: (1) the accountants must have awareness that the financial reports were to be used for a particular purpose (2) in the furtherance of which a known party was intended to rely and (3) there must have been some conduct on the part of the accountants linking them to that party which evinces the accountants’ understanding of that parties reliance
There was no allegation, Andersen had direct dealings with Credit Alliance
Conclusion: CA fell within the exception to the general rule that requires privity to maintain an accounting against an accountant for negligence. The dismissed the charges against Andersen
Chapter 27
Hey all,
My mom works at a bank so Professor Custin asked me to ask her a couple questions to help clarify our class discussion last week. Here are the main points:
1) If somebody writes me a check, and I endorse the back of the check but I do not write "for deposit only," then I lose the check before I bring it to the bank, the check turns into a bearer instrument and whoever finds it can cash the check.
2) However, if I write "for deposit only" on the back of the check and I endorse the check, then it doesn't matter if I lose the check because it can only be deposited into an account with my name on it.
3) It doesn't matter what you write on the back of the check first (for deposit only and then your signature or the other way around). All that matters is that both components are there.
4) Also, if you bring a check to the bank that is not endorsed on the back, most tellers will make you sign it before you give it to them.
5) Lastly, banks used to require that you write your account number on the check, but now it is not required for security reasons.
Hope that helps!
My mom works at a bank so Professor Custin asked me to ask her a couple questions to help clarify our class discussion last week. Here are the main points:
1) If somebody writes me a check, and I endorse the back of the check but I do not write "for deposit only," then I lose the check before I bring it to the bank, the check turns into a bearer instrument and whoever finds it can cash the check.
2) However, if I write "for deposit only" on the back of the check and I endorse the check, then it doesn't matter if I lose the check because it can only be deposited into an account with my name on it.
3) It doesn't matter what you write on the back of the check first (for deposit only and then your signature or the other way around). All that matters is that both components are there.
4) Also, if you bring a check to the bank that is not endorsed on the back, most tellers will make you sign it before you give it to them.
5) Lastly, banks used to require that you write your account number on the check, but now it is not required for security reasons.
Hope that helps!
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