Accountants' Liability: Litigation and Issues in the Financial Crisis
Why Attend?
Are you prepared to capitalize on the surge in litigation against financial companies and accountants generated by the meltdown of the financial markets?
Are you familiar with the unique accounting and auditing issues involved in the new subprime and credit crunch legislation?
New federal securities class action filings increased by 19% in 2008 as compared with 2007. Almost half of the new filings targeted financial companies and more than 40% were directly related to the subprime/liquidity crisis. Most of the suits take aim at accounting irregularities. Many of the suits name accounting firms.
If you’re involved in the litigation, or affected by it, you need this course to understand the issues that are driving it and to better counsel your clients. Stay in front of the wave of litigation; don’t let it crash down on you.
Comprising more than 14 hours of instruction, the course provides an overview of the changing principles that govern the field of accountants’ liability, with particular emphasis on the developments that followed the major corporate failures that have been linked to fraudulent financial reporting and issues that the profession will likely face in the coming years. Topics include:
The impact of the current economic crisis and accompanying financial frauds
Sarbanes-Oxley and its aftermath for the profession
SEC enforcement initiatives and trends
Concerns of the Public Company Accounting Oversight Board
Control reporting
Recent case law developments
Increased regulatory activity at the federal and state level, including inspections and discipline
Responses of the profession and self-regulatory organizations to recent events
Internationalization of accounting standards and momentum in the United States away from GAAP and toward IFRS
Practical tips offered from both the plaintiff and the defense perspectives
Preparation and trial of an accountants' liability case
What You Will Learn
The current economic crisis poses new challenges and new hazards for the accounting profession, and this course examines and analyzes the challenges and hazards.
The corporate accounting scandals earlier in the decade and the resulting Sarbanes-Oxley Act greatly changed the environment in which the accounting profession operates, altering not only the profession’s responsibilities but also the nature of its relationship with its clients. Now, a new wave of scandals and an economic meltdown may herald further dramatic changes. Two segments in the program address the key issues for accountants arising from the subprime credit crunch.
The past several years saw many legislative and regulatory responses to the profession’s role in the previous spate of corporate scandals. For example, the PCAOB is issuing inspection reports and taking enforcement action, and regulation at the state level has become more stringent. Legislative and regulatory developments are addressed in several segments of the course, including a keynote address by the Chief Counsel for the SEC’s accounting office, an overview of the SEC’s enforcement initiatives and trends, and a presentation on the special concerns of the PCAOB.
Yet, just as accounting firms have begun to adapt to these changes, there are indications that the nation’s regulatory structures may be revamped further. New auditing and accounting standards are being promulgated and are becoming increasingly internationalized, accompanied by a lively debate about how quickly and how thoroughly the United States should move toward “principle-based” rather than “rule-based” accounting. A special presentation by two prominent practitioners spells out the key differences between GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards).
The threat of ruinous legal liability for accounting firms continues and may be increasing due to recent revelations, even as calls continue for liability caps for the profession. The course highlights the key developments in the litigation with presentations on class actions, suits against smaller firms, SEC and PCAOB Investigations, trustee actions, damages, and causation issues.
Other segments in the course address common practice problems, such as restatements, that can generate liability exposure. A final segment of the course analyzes the important ethical issues that arise in accountant’s liability litigation.
Registrants are encouraged to submit questions to the faculty and to interact directly with the faculty during networking sessions and at the Thursday afternoon reception.
Who Should Attend
Attorneys, accountants, corporate executives, and other professionals who must stay in front of the growing wave of accountants' liability litigation and want to network with similar professionals from across the U.S. should attend this one-of-a-kind event!
Planning Chairs
John H. Eickemeyer, Vedder Price P.C., New York
Richard P. Swanson, Arnold & Porter LLP, New York
Faculty
Erica Baird, Principal, PricewaterhouseCoopers LLP, New York
Leo R. Beus, Beus Gilbert PLLC, Scottsdale, Arizona
Lynda S. Borucki, Ph.D., Principal, The Brattle Group, Inc., Cambridge, Massachusetts
Robert J. Burson, Associate Regional Director, U.S. Securities and Exchange Commission, Chicago
Catherine J. Casey, BDO Seidman, LLP, Chicago
Mark L. Cheffers, CPA, ABV, CEO, Audit Analytics, Inc., Sutton, Massachusetts
Caroline K. Cheng, Associate General Counsel, Office of General Counsel, Deloitte LLP, New York
Kenneth Cunningham, Associate General Counsel, Grant Thornton LLP, Chicago
Christopher M. Cutler, McGuireWoods LLP, Washington, D.C.
Timothy A. Duffy, Kirkland & Ellis LLP, Chicago
Sanford P. Dumain, Milberg LLP, New York
Cynthia M. Fornelli, Executive Director, Center for Audit Quality, Washington, D.C.
Daniel L. Goelzer, Board Member, Public Company Accounting Oversight Board, Bethesda, Maryland
Ronald S. Herzog, Snow Becker Krauss P.C., New York
Robert B. Hubbell, Gibson, Dunn & Crutcher LLP, Los Angeles
Catherine W. Joyce, Winston & Strawn LLP, Chicago
Robert J. Kueppers, Deputy CEO, Deloitte LLP, New York
Kevin J. Kuhn, Vedder Price PC, Chicago
Vincent J. Love, CPA, Kramer Love & Cutler, LLP, New York
Jeffrey J. Minton, Chief Counsel, Office of the Chief Accountant, U.S. Securities and Exchange Commission, Washington, D.C.
Christian J. Mixter, Morgan, Lewis & Bockius LLP, Washington, D.C.
Claudius B. Modesti, Director of Enforcement and Investigations, Public Company Accounting Oversight Board, Washington, D.C.
Veronica E. Rendon, Arnold & Porter LLP, New York
Walter G. Ricciardi, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York
Amelia Toy Rudolph, Sutherland Asbill & Brennan LLP, Atlanta
Scott B. Schreiber, Arnold & Porter LLP, Washington, D.C.
Elizabeth V.Tanis, King & Spauding, Atlanta
Scott M. Univer, General Counsel, Weiser LLP, New York
ALI-ABA Staff Attorney: Thomas M. Hennessey, Assistant Director, Office of Courses of Study
Program Schedule
THURSDAY, JULY 9, 2009
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
One of the Planning Chairs 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?
12:00 noon 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 - Messrr. 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 (continued)
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 - Messrs. Burson, 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.
FRIDAY, JULY 10, 2009
7:30 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. Two 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. Two practitioners discuss how to handle such investigations.
12:30 p.m. Lunch Break
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: 14.5; Total 50-minute hours of instruction: 17.4.
Suggested Prerequisite: Limited experience in legal practice in subject matter or completion of Basic CLE Course in subject matter
Educational Objective: Acquisition of knowledge and skills to develop proficiency as a practitioner; maintenance of professional competence as a practitioner; provision of information on recent legal developments
Here's what registrants have said about this course:
Excellent program. Across the board great – speakers, topics, materials. Nice Work!
Even better than last year’s program. Very informative and timely.
Lots of information and very well presented… Great depth of information.
One of the best legal education seminars I have ever been to!
The range of topics was terrific, as was the quality of the presenters. I was glad to see that topics were modified to keep relevant with current developments.
Excellent, family-like atmosphere created by co-chairs at this conference. This is the single best conference I attend all year, measured by pacing of presentation, quality of speakers, and course materials.
I have attended all but several of these annual courses since the beginning. This was, by far, the best – excellent speakers and topics. Please do this again!
It is infrequent that I have had the opportunity to hear from knowledgeable and competent plaintiffs’ counsel. The perspective was extremely interesting and valuable for me as defense counsel.
This is a high quality session peopled with gifted and professional panelists. I will send others from my firm to future sessions.
Excellent course. Strong materials and impressive speakers. I’ll return next year.
