ALI-ABA Course of Study Accountants' Liability: Litigation and Issues in the Financial Crisis July 9-10, 2009 Chicago, Illinois

Transcription

1 ALI-ABA Course of Study Accountants' Liability: Litigation and Issues in the Financial Crisis July 9-10, 2009 Chicago, Illinois PROGRAM FACULTY PARTICIPANTS TABLE OF CONTENTS Page xi xv STUDY MATERIALS 1. Introduction and Overview By Richard P. Swanson 2. Theories of Liability 21 By Richard P. Swanson Table of Contents 23 Study Material Letter to SEC from Center for Audit Quality re Roadmap for the Potential Use of Financial Statements Prepared in Accordance with IFRS by U.S. Issuers By Cynthia M. Fornelli 4. Letter to SEC from Center for Audit Quality re Progress Report of the Advisory Committee on Improvements to Financial Reporting By Cynthia M. Fornelli 5. Accountants Professional Liability Scorecards and Commentary 95 By Mark L. Cheffers and Robert J. Kueppers Presentation Slides 97 Apprendix: Audit Analytics Issues Analysis Auditors' Internal Controls: Audit Manuals, Workpaper, Personnel Records and Expense Account Information Often Provide Helpful Information in an Audit Malpractice Case By Leo R. Beus 7. Proximate Cause, Foreseeability, and Deepening Insolvency in Accountants' Liability Litigation By Leo R. Beus 8. Class Action Suits, Auditor Liabilty, and the Effect of the Private Securities Litigation Reform Act of 1995 By Sanford P. Dumain vii

2 9. Class Actions Against Accountants -- Standards for Class Certification By Kevin J. Kuhn 10. Accountants' Litigation Involving Smaller Firms By John H. Eickemeyer and Ronald S. Herzog 11. Overview of Key Defenses Available in a Section 11 Claim against an Auditor By Maureen Aidasani and Kenneth Cunningham 12. IFRS and Accountants' Liability By Vincent J. Love and John H. Eickemeyer 13. International Financial Reporting Standards (IFRS) v. U.S. Generally Accepted Accounting Standards (GAAS) By John H. Eickemeyer and Vincent J. Love Recent Work of the Public Company Accounting Oversight Board 243 By Daniel L. Goelzer and Claudia B. Modesti Table of Contents 245 Study Materials 247 Appendix A: Auditing Standard No Handling an SEC or PCAOB Investigation By Caroline K. Cheng, Scott B. Schreiber, and Christopher M. Cutler 16. Invoking In Pari Delicto To Bar Accountant Liability Actions Brought by 329 Trustees and Receivers By Amelia Toy Rudolph and Drew D. Dropkin Table of Contents 330 Study Materials Emerging Issues in Deepening Insolvency: Causation and Pitfalls of 377 Measuring Damages as the "Shortfall in the Estate" or Other Liabilities By Elizabeth V. Tanis and Jennifer D. Fease Table of Contents 378 Study Materials Issues in Causation and Class Certification (Handout) By Lynda S. Borucki, Ph.D Defending a "Red Flags" Case (Handout) By Timothy A. Duffy 20. Defending the Auditor at Trial 2 (Handout) By Robert B. Hubbell 21. Deposition Protocol (Handout) By Catherine W. Joyce 22. Expert Witness Stipulation (Handout) By Catherine W. Joyce 23. Litigating and Trying an Accountants' Liability Case (Handout) By Catherine W. Joyce viii

3 24. Subprime the Credit Crisis and Valuation Issues (Handout) By Veronica E. Rendon 25. Major Types of Deepening Insolvency Cases (Handout) By Elizabeth Vranicar Tanis 26. The Dog Barked in the Night (Handout) By Scott M. Univer 27. Selected SEC Valuation Cases Brought Against Accountants and Auditors (Handout) By Christian J. Mixter ix

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5 ALI-ABA Course of Study Live Video Webcast Accountants Liability: Litigation and Issues in the Financial Crisis July 9-10, 2009 Chicago, Illinois PROGRAM Thursday, July 9, 2009 (subject to minor changes) 7:30 a.m. Registration and Networking Session Webcast Segment A 8:30 a.m. Introduction Messrs. Eickemeyer and Swanson 8:45 a.m. Current Developments and Course Overview Mr. Swanson A course Planning Chair outlines the key developments and trends that are affecting accountants liability today: Public perception of the accounting profession after Enron, and the impact of the subprime and credit crisis on public perception; the impact of financial market regulatory reforms arising out of the credit crisis on the accounting profession; the effect of Sarbanes- Oxley on the profession, including firm structure, quality control, concentration and perceptions of risk, relationships with clients, and interaction with audit committees; litigation against accountants; and internationalization and convergence of accounting standards and the implications of new standards for litigation. 9:30 a.m. Keynote Address Mr. Minton The Chief Counsel of the Office of the Chief Accountant of the Securities and Exchange Commission addresses current topics affecting the accounting profession. 10:15 a.m. Networking Break 10:30 a.m. The Credit Crisis Ms. Fornelli The Executive Director of the Center for Audit Quality discusses audit and accounting issues arising in the current economic environment. 11:15 a.m. Developments on the Horizon Messrs. Cheffers and Kueppers As if the changes in the past several years after Sarbanes-Oxley weren t enough, the next few years after the credit crunch are likely to see even more changes in accounting firm structure and regulation. Can only four firms effectively audit most public companies? What is the future of firm structure given the virtual collapse of major financial institutions, ongoing restatements, control deficiencies, and SEC proceedings and settlements? What will new financial regulators require? What other issues can the profession expect to face? An industry consultant and an accounting executive offer some answers. xi

6 12:00 p.m. Subprime and Credit Crunch Issues Ms. Rendon The subprime and credit crises have begun to produce claims against accounting firms, at times in staggering amounts. In this segment, a practitioner and a general counsel for an accounting firm explain how these historic economic conditions raise unique accounting, auditing, and litigation issues which are only now starting to emerge. FAS 140, 157 and 159, mark to market, loan loss reserves, other relevant accounting and auditing standards, and current litigation are considered. 12:45 p.m. Lunch Break Webcast Segment B 2:00 p.m. Litigating an Accountants Liability Case A Plaintiff s Perspective Mr. Beus A noted plaintiffs counsel in accounting cases shares his views. 2:45 p.m. Litigating and Trying an Accountants Liability Case Messrs. Duffy and Hubbell and Ms. Joyce Three practitioners offer tips on litigating an accountants liability case, including motion practice, discovery strategies and access to firm manuals and personnel files, electronic discovery issues, development of trial themes, experts, motions in limine, witness selection and preparation, keeping the jury s interest, use of technology, and opening statements and summation. 3:30 p.m. Networking Break 3:45 p.m. Litigating and Trying an Accountants Liability Case (cont d) 4:15 p.m. Class Actions Messrs. Dumain and Kuhn Statistics show dramatic growth in securities class action litigation, yet recent case decisions place new hurdles to clear certification, including requiring evidentiary showings of actual class-wide causation. Pleading fraud with particularity is also a hurdle. These and other matters are considered by two experienced practitioners. 5:00 p.m. The SEC and the Profession Ms. Gillette and Messrs. Mixter and Ricciardi The SEC s enforcement docket on accounting matters continues to be heavy. In this segment, a SEC staffer and two former SEC staffers discuss current enforcement initiatives and trends. Topics include the current controversy over fair value and mark to market, internal controls, IFRS and convergence, restatements, SAB 99 and other pronouncements on materiality, SAB 101 on revenue recognition, pro forma reporting, and earnings management. 5:45 p.m. Accountants Litigation Involving Smaller Firms Messrs. Eickemeyer and Herzog Not all accountants litigation is against the Big 4 or other large firms. Claims against smaller firms are less likely to be securities class action claims, and more likely to be brought by lending banks or trade creditors. In this segment, two attorneys discuss the issues that commonly arise in these suits, including services other than audits, poor quality workpapers, privity, unsophisticated accountants who may be poor witnesses, and tax claims. 6:15 p.m. Adjournment for the Day; Networking Reception for Registrants and Faculty, Hosted by Arnold & Porter LLP and Vedder Price P.C. xii

7 Friday, July 10, :30 a.m. Networking Session Webcast Segment C 8:00 a.m. The Impact of Sarbanes-Oxley Mr. Cunningham This panel discusses the current litigation and regulatory topics affecting the larger firms. Subjects considered include: Sarbanes-Oxley; CEO and CFO certification; internal control reports; auditor rotation; foreign registration and regulation; work paper standards and retention; new auditing standards; international accounting standards; consulting; limitations on accounting services; and liability limitations. 8:45 a.m. Practice Problems Ms. Baird and Mr. Univer Several recurrent practice problems can generate liability exposure and must be appropriately managed. They often arise in a tense crisis atmosphere and must be addressed quickly. Three accounting firm attorneys discuss the problems, which include comfort letters, consents, 10A issues and investigations, restatements, management integrity, withdrawal of opinions, and resignation. 9:30 a.m. International Financial Reporting Standards Messrs. Eickemeyer and Love The SEC is pushing towards convergence of financial reporting standards, and the winner appears to be IFRS, not GAAP. IFRS is a more principles-based system, which will have litigation implications. This panel explains how IFRS differs from GAAP. 10:00 a.m. Networking Break 10:15 a.m. PCAOB Concerns Messrs. Goelzer and Modesti A member of the Public Company Accounting Oversight Board and its director of enforcement address the PCAOB s concerns, including formulation of auditing standards, 404 control reports, inspections and reports, and professional discipline and enforcement. 11:00 a.m. Restatements (speaker to be announced) Restatements present some of the thorniest issues for issuers and auditors, and some of the biggest liability risks. These speakers discuss the nuts and bolts of the restatement process. 11:45 a.m. Handling an SEC or PCAOB Investigation Ms. Cheng and Messrs. Cutler and Schreiber Representing an accountant in an SEC or PCAOB investigation calls for different skills and tactics than private litigation, in part because your adversary can also be the judge, jury, and executioner. Three practitioners discuss how to handle such investigations. 12:30 p.m. Lunch Break xiii

8 Webcast Segment D 2:00 p.m. Trustee Actions, the In Pari Delicto Defense, and Deepening Insolvency Mss. Casey, Rendon, Rudolph, and Tanis In addition to class actions, accounting firms also are being targeted in trustee actions. Three practitioners discuss the substantial evolution of the in pari delicto defense and the related doctrine of deepening insolvency in cases brought by receivers and trustees against accountants. 2:45 p.m. Damages and Causation Ms. Borucki The Supreme Court s decision in Dura Pharmaceuticals and other recent development have placed new emphasis on theories of damages and causation in accountants liability cases. In this segment, an industry consultant explains how damage causation can even be an important class certification issue and why it is important to have a well-founded damages theory, or to be able to attack the plaintiff s theory. 3:15 p.m. Ethical Considerations Messrs. Eickemeyer and Swanson This segment addresses key ethical issues that arise in accountants liability litigation, including: ethical issues arising from the three-way relationship among the insurer, the accountant, and defense counsel; internal investigations; issues of multiple representation; former employees; and the attorney-client, accountant-client, work-product, and other privileges. 4:15 p.m. Adjournment Total 60-minute hours of instruction: 14.25, including one hour of ethics. xiv

9 ALI-ABA Course of Study Accountants Liability: Litigation and Issues in the Financial Crisis July 9-10, 2009 Chicago, Illinois PLANNING CHAIRS John H. Eickemeyer, Esquire Vedder Price P.C. 47th Floor 1633 Broadway New York, NY Richard P. Swanson, Esquire Arnold & Porter LLP 399 Park Avenue New York, NY KEYNOTE SPEAKER Jeffrey J. Minton, Esquire Chief Counsel Office of the Chief Accountant U.S. Securities and Exchange Commission 100 Fine Street, NE Washington, DC FACULTY Erica Baird, Esquire PricewaterhouseCoopers LLP 300 Madison Avenue New York, NY Leo R. Beus, Esquire Beus Gilbert PLLC Suite N. Scottsdale Road Scottsdale, AZ Lynda S. Borucki, Ph.D. The Brattle Group, Inc. 44 Brattle Street Cambridge, MA Catherine J. Casey, Esquire Deputy General Counsel BDO Seidman LLP Suite East Randolph Street Chicago, IL Mark L. Cheffers, CEO Audit Analytics Suite 2F 9 Main Street Sutton, MA Caroline K. Cheng, Esquire Associate General Counsel Office of General Counsel Deloitte LLP 1633 Broadway New York, NY xv

10 Kenneth Cunningham, Esquire Associate General Counsel Grant Thornton LLP 20th Floor 175 West Jackson Boulevard Chicago, IL Christopher M. Cutler, Esquire McGuireWoods LLP Washington Square Suite Connecticut Avenue, N.W. Washington, DC Timothy A. Duffy, P.C. Kirkland & Ellis LLP 300 North LaSalle Chicago, IL Sanford P. Dumain, Esquire Milberg LLP 49th Floor One Pennsylvania Plaza New York, NY Cynthia M. Fornelli, Esquire Executive Director Center for Audit Quality Suite 800 North th Street, NW Washington, DC Merri Jo Gillette, Esquire Executive Director U.S. Securities and Exchange Commission Suite West Jackson Boulevard Chicago, IL Daniel L. Goelzer, Esquire Public Company Accounting Oversight Board Suite K Street, NW Washington, DC Ronald S. Herzog, Esquire Snow Becker Krauss P.C. 25th Floor 605 Third Avenue New York, NY Robert B. Hubbell, Esquire Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA Catherine W. Joyce, Esquire Winston & Strawn LLP 33 West Wacker Drive Chicago, IL Robert J. Kueppers, Esquire Deputy CEO Deloitte LLP 1633 Broadway New York, NY Kevin J. Kuhn, Esquire Vedder Price LLP 222 North LaSalle Street Chicago, IL Vincent J. Love, CPA Kramer, Love & Cutler, LLP 675 Third Avenue New York, NY Christian J. Mixter, Esquire Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC Claudius B. Modesti, Esquire Director of Enforcement and Investigations Public Company Accounting Oversight Board 1666 K Street, NW Washington, DC xvi

11 Veronica E. Rendon, Esquire Arnold & Porter LLP 399 Park Avenue New York, NY Walter G. Ricciardi, Esquire Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY Amelia Toy Rudolph, Esquire Sutherland Asbill & Brennan LLP 999 Peachtree Street, NE Atlanta, GA Scott Schreiber, Esquire Arnold & Porter LLP 555 Twelfth Street, N.W. Washington, D.C Elizabeth V. Tanis, Esquire (Beth) King & Spalding LLP 1180 Peachtree Street, NE Atlanta, GA Scott M. Univer, Esquire General Counsel Weiser LLP 135 West 50th Street New York, NY NOTE: Please go to for biographical information about this Faculty. xvii

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