...SHORT PAPER – DUE PROFESSIONAL CARE AND DUE DILIGENCE ALEX KARAHALIOS The legal risks faced by the CPA profession are ever so present today in our capitalist society. When CPAs and CPA firms execute an engagement for an auditing client, they know well that risk they exposed themselves to significant liability should their report conclusion and recommendations cause monetary damages. This liability does not only extend to direct customers. There is also a risk posed by third parties that at the time of the engagement the CPA or firm had no knowledge of. Common laws have various forms of negligence that the CPA profession has to defend itself against. The statutory laws add the additional liability of criminal proceedings against the CPAs and the CPA firms who find themselves as defendants. The underlying accusation of negligence finds it way back to whether CPA defendants sufficient due diligence and professional care. While the Public Company Accounting Oversight Board (PCAOB) governs the SEC registered CPA firms to ensure that they are compliant in how they execute auditing services, the American Institute of Certified Public Accountants (AICPA) strives to improve the delicate balance of acceptable level of both due professional care and due diligence. The following two cases will address the inherent liability as well as professional care and due diligence. The Ultramares v. Touche & Co. case of 1931 is a great example of the inherent risks of the CPA profession...
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...garden out of a wilderness are bound to succeed. It is an admitted fact that work makes a man active, agile and alert. An industrious man is always strong and sturdy. Work blesses him with zeal and zest. By working hard he gets a glorious status in society. The sweet fruit of his labour benefits not only the man but also his nation and country. Such hardworking men are the real assets of a nation. History reveals that those nations who worked their fingers to bone were honoured and successful. They emerged as victorious nations of the world. They ruled over the world as long as they remained diligent. But when they broke the habit of industry and became lethargic, they were humiliated and disgraced. Islam lays a great stress upon diligence. The holy prophet said. “The hardworking man is friend of Allah.” The holy prophet would do his work with his own hands. He disliked if someone should do his work for him. The holy life of the holy prophet reflects the dignity of work. “nothing is for a man but the thing he struggles for.” The beloved daughter of the holy prophet did her household work herself. She herself would grind flour, bring water and sweep the house. All these examples urge us to be diligent in life. In the present era, the Muslims have lost their grace and honour. The only reason behind it is that they have forgotten the golden traditions of their forefathers. On the other hand, the western nations have adopted the habit...
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...MGMT 520 Legal, Political and Ethical Dimensions of Business Week 3 - Discussion 2 - Environmental Liability and Due Process In 1979, Paul and John Reardon purchased 16 acres of land located next to a manufacturing plant in Massachusetts. In 1983, a state environmental agency, responding to a citizen's report, tested soil samples from both properties and discovered extremely high levels of polychlorinated biphenyls (PCBs) on the plant site and on the Reardons' property where it bordered the site. Shortly thereafter, the Environmental Protection Agency (EPA) cleaned up the contaminated areas. In 1985, the EPA notified the Reardons that they might be liable for clean-up costs. An EPA investigation of the property in 1987 revealed that some soil was still contaminated. This time, the Reardons cleaned up the property themselves. In March 1989, the EPA placed a lien for an unspecified amount on all of the Reardons' property to secure payment for any clean-up costs for which the Reardons might be liable. The EPA told the Reardons that they could settle the claims against them for $336,709 but noted that this amount did not limit the Reardon’s potential liability. The Reardons filed a motion for an injunction, arguing that filing a lien against their property without any prior notice or hearing violated their due process rights under the Fifth Amendment, which states that no person can be deprived of life, liberty, or property without due process of law. Superfund (the Comprehensive...
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...Discussion Assignment―Define RFP Response Strategy Your original post should address these topics: As a seller, using M6.1 to M6.2, define how your team will respond to the RFP for your project. As the seller team’s Director of Professional Services, respond to two other original posts: Verify that the team has properly understood project scope. Verify the team’s assessment that the RFP is qualified for submitting a bid. Check that the due diligence is properly completed. Response Team Includes:IxD Director, Sales lead, Technical expert, Contract/legal team representative, Accounting representative, EVP and Stakeholders, Production Team, Project manager, Business analyst representative Qualify the Opportunity: Due to previous experience with seller, it is known that an easy partnership will be formed. Scope is clearly described with well defined and generous to deliver milestones deliverables Screen Buyer: The buyer contacted the seller ready to purchase. After meetings with seller’s production team members, SMEs, stakeholders, and project sponsor, It is clear they are in a position to move forward. ID Internal Requirements: Historically, working with the organization has proven to be beneficial both by building name recognition and financially. The buyers organizational goals align well with our organization. The key milestones and deliverable dates are very generous and we project the project could be done early then buyer is projecting. Buyer has stated...
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...exercise due diligence in accepting all clients and engagements. Basic steps include: Evaluate prospective client integrity. Personally meet with prospective clients (senior management, owners, and/or directors for business clients). Ask for and follow up with references, including attorneys, bankers, other business consultants, and major vendors or customers. Verify that relationships were not terminated due to disagreements regarding business operations or outstanding invoices. For key executives of business clients (especially those not known by the CPA firm), ask for and follow up with personal references, including previous employers and business associates. Consider obtaining a credit history for individual tax and financial planning clients. If the prospective client is changing CPA firms, request permission to contact the predecessor firm to investigate issues such as the client’s consideration of advice provided, integrity, ethics, reasonableness of expectations, experience and qualifications of the staff, and business policies and procedures including cooperation, timing of the engagement, and whether the client pays bills on time. The previous CPA firm can provide only limited information unless it obtains an Internal Revenue Code Sec. 7216 disclosure statement from the client. Even so, the prospective client’s reaction to this request (and the response of the predecessor firm) may be indicative of the client’s relationship with professional service providers...
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...Summary Professional code of ethics, Definition, “Professionally accepted standards of personal and business behavior, values and guiding principles” Importance, A code of ethics is essential to a profession; the code will provide an ethical starting point for the professionals and for others outside the profession. Professional code inform members of the profession about the viewpoints they should consider in making a decision. A code of ethics serves to promote the values of the profession over the personal, societal, and (sometimes) institutional values. It serves as a guideline for professionalism and quality of service. Ethical principles, 1) Integrity 2) Objectivity 3) Competence 4) Fairness 5) Confidentiality 6) Professionalism (7) diligence Development of teacher code of ethics, 1) Obligation towards students: a. Deal justly & impartially with students. b. Identifying the individual needs of the students. c. Respects the right of every student. d. Encourage students for the betterment of their future. 2) Obligation towards parents a. Respect the basic responsibility of parents for their children. b. Establish friendly & cooperative relationship. c. Keep parents informed about the progress of their children. 3) Obligation towards community i. Respect & be loyal to the community’s moral, spiritual ...
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...DOCTORINE OF DUE DILIGENCE Introduction of Due Diligence: Due Diligence is a process of thorough and objective examination that is undertaken before corporate entities enter into major transactions such as mergers and acquisitions, issuing new stocks and other securities, project finance, securitization, etc. One of the key objectives of due diligence is to minimize, to the maximum extent practicable, the possibility of there being unknown liabilities or risks. The exercise is the multi-dimensional and involves investigation into the business, tax, financial, accounting and legal aspects of an issuer. Definition of Due Diligence: "Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for acquisition. * Due diligence can be defined as: 1. The examination of a potential target for merger, acquisition, privatization, or similar corporate finance transaction normally by a buyer. 2. A reasonable investigation focusing on material future matters. 3. An examination being achieved by asking certain key questions, including, how do we buy, how do we structure the acquisition, and how much do we...
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...beginning of the merger process rather than calling on them post-merger to begin managing the merger at that point (Lindquist, 2007). HR is uniquely qualified to provide the business acumen, analytical skills, and close collaboration with mangers that is needed to handle the organizational and people issues that a merger raises (Lindquist, 2007). When two companies decide to merge they go through a process called due diligence, this process can take anywhere from months to a year, with the average being about 3 months (no author, 2005). HR professionals are valuable partners when they are utilized during due diligence. Due diligence allows the two companies to provide all the documents concerning their organizations, these documents include compensation rates, bargaining agreements, employment contracts and severance agreements, job classifications and pay rates, employee handbooks, affirmative action plans, and any number of documents that show each organizations alignment (no author, 2005). After all documentation has been gathered then HR professionals should review and prepare an organizational chart for the companies that shows the number and type of employees and their departments,...
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...Diligence is steadfast application, assiduousness and industry; the virtue of hard work. It is one of the seven heavenly virtues. Diligent behaviour is indicative of a work ethic; a belief that work is good in itself. Diligence in students Bernard et al. Other factors which encourage diligence in students include motivation, discipline, concentration, responsibility and devotedness. Diligence in Buddhism The last words of the Buddha was "Strive on with diligence". Diligence is an integral part of all Buddhist teaching, and is considered the fourth of the pāramitā. In Mahayana tradition diligence is the third pāramitā and the first which is said to lead to liberation. The practice of diligence will bring an increase of qualities. Diligence in Christianity Diligence, in Christianity, is the effort to do one's part, while keeping faith and reliance in God. In other words, diligence and faith are two sides of a mystery. One doesn’t know how, despite one's effort, it all works out. But diligence when combined with faith assures spiritual success. Diligence as one of seven virtues describes thoroughness, completeness and persistence of an action, particularly in matters of faith. Diligence in Hinduism According to Brian Hatcher, the precepts of Hinduism require a human being to discover and live a dharmic life. To live a dharmic life, one must live with right intention with diligence, and with concern for well being of others. The Hindus celebrate Diwali, a festival...
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...money coming from? Management Buy Outs and Management Buy Ins Do I need Heads of Agreement (“Heads”)? Take a good look at the target Share Purchase – The Legal Paperwork Asset Purchase – The Legal Paperwork Buying from an Administrator or Liquidator Completion Legal Costs 1. Introduction What follows is a brief overview of a complex legal area in which many traps and pitfalls await those unprepared. This guide outlines the main considerations that apply in buying or selling a business with practical advice based upon our own experiences of buying and selling numerous businesses for our clients over the years. There is no substitute for early, fast, pragmatic legal and other professional advice to guide you through the transaction whilst allowing you to remain focussed on the key management and operational decisions affecting the business. In our experience, every deal is unique. Steeles Law, Corporate and Commercial team Service, response times and business acumen are without fault Legal 500 2. So Where Do I Begin The Process? Proper legal advice is essential early in any major transaction for two key reasons: 1. to ensure certainty – are you clear exactly what it is you are buying or selling? Does the agreement reflect that? Don’t get “caught out”. 2. to protect your investment, or the proceeds of your sale, against unexpected liabilities. Why am I buying? You must be certain...
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...critical that the CIA (Confidentiality, Integrity and Availability) is vital in protecting data that companies have of its customers. Due care is defined by the Information Systems Audit and Control Association (ISACA) as: 2.1.1 The standard of “due care” is the level of diligence which a prudent and competent person would exercise under a given set of circumstances. “Due professional care” applies to an individual who professes to exercise a special skill such as information system auditing. Due professional care requires the individual to exercise that skill to a level commonly possessed by practitioners of that specialty. 2.1.2 Due professional care applies to the exercise or professional judgment in the conduct of work performed. Due care implies that the professional approaches matters requiring professional judgment with proper diligence. Despite the exercise of due professional care and professional judgment, situations may nonetheless arise where an incorrect conclusion may be drawn from a diligent review of the available facts and circumstances. Therefore, the subsequent discovery of incorrect conclusions does not, in and of itself, indicate inadequate professional judgment or lack of diligence on the part of the IS auditor. (Information Sys) Administrative Controls and due care should go hand in hand. One cannot hope to demonstrate due care without having the proper administrative controls such as a good Information Technology protection plan. An example...
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...Keystone Business Support Company Ltd. ABOUT US Keystone is a professional services company with management and administrative staff headquartered in Dhaka, Bangladesh. The company provides comprehensive business solutions to private businesses, financial institutions, investors, bilateral and multilateral institutions. A special strength of Keystone lies in its ability to help prepare for and implement energy sector projects both with regards to conventional and nonconventional energy sources. Keystone is also particularly strong in the areas of financial modeling and conducting legal and technical due diligence. These strengths are applicable in a wide variety of fields and we are constantly branching out to new areas to expand our product offering. Keystone has a global network of expert consultants across major cities including Boston, Delhi, Dubai, Hong Kong, London, New York, San Francisco, Singapore, Sydney, and Washington DC. Keystone is continually expanding to other major cities as its business grows. OUR APPROACH Keystone’s Project Teams pair international experts with local talent to devise Global Best Practice Solutions tailored to the specific country context. This also allows us to offer a high international quality service locally. Our first and foremost goal is to craft concrete and actionable steps for our clients that deliver results. OUR STRENGTHS Expertise : Keystone draws its strength from its diverse team of international experts. The company...
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...to time. You may not worry about such things at this time in your life, but you do think about them. We are all aware of the economic downturn in the United States, as our nation faces many problems at this time. Unemployment problems are continually in the news with many major corporations laying off employees as part of necessary cutbacks. Some of these may already be affecting your family. Many of you harbor legitimate concerns and are uncertain about your future. Even with conditions that now occur in our economy, a way exists for you to be successful and to land a good job in this country. This key concept or way for you to be successful starts right now no matter your age or grade in school. It can be described in a word: diligence. Diligence means “steady, earnest, energetic application and effort.” The opposite of a diligent person is one who is indifferent, lazy or a sluggard. An indifferent and lazy person displays a lack of interest or concern, placing little or no importance or value on their...
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...put together this critical information in the desired format even after circulating a standard format among outlets. Further, there were many clerical errors and a lack of understanding about the real purpose of the information sent by the company’s outlets. To make matter worse, the information received from outlets was irregular, making it difficult to deliver the MIS on a target date to the company’s management. Solution Not only did the MIS function take up too much of the CFO’s time and energy, in addition, it consumed the efforts of a dedicated professional, a qualified Chartered Accountant. Management recognized that better information was needed to understand where the strategies in terms of Food Costing were not working. BC was approached and contracted to streamline this function. Before this, BC had not worked with any client in the retail food industry. Implementation First, we conducted a professional due diligence process which took 5 working days to diagnose the real problems. Then, we prepared a short term view on issues to be addressed over the following 3 months. Also, we prepared a long term plan in which larger issues would be addressed over a period of 12 months. In the first...
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...Consultation (confidential "no fee" consultation) STEP 2 - Making the First Approach Who within an organisation to first approach about a possible MBO is vital. Generally speaking, you will have a good idea who the most approachable person is. Of course, it may be a case that the existing shareholders / management have approached you with a view to considering an MBO (considering an exit?). In the extreme case if you approach the wrong person they immediately may regard you as a threat and this could have consequences for your existing position. STEP 3 - First Approaches and Completion of Confidentiality Agreements In order for you to be able to talk to your professional advisors, the target company will require you to sign a confidentiality agreement so certain information can be released to your professional advisors and yourself. STEP 4 - Deciding on the MBO Team Generally, MBO's are driven by one to two senior management. An important part of the process which we will assist you in is to try to determine what other key members of the management team you should include. The seller will generally appoint their own advisors to assist them in the negotiations. The possible negative effects of not choosing certain members will have to be examined and the split of shareholding between the management team will have to be agreed. It is probably best for the main drivers of the MBO to go as far down the process as possible before introducing other key members of management...
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