Abstract
This two-part instructional case examines an auditor’s reporting decision in a complex, actual situation and the auditor’s liability to shareholders under US federal securities laws. Part One of the case describes the history and operations of furniture retailer Heilig–Meyers. Students use information from Heilig–Meyers’ fiscal 2000 annual report to decide whether the auditors should have expressed substantial doubt about the company’s ability to continue as a going concern. Part Two describes a shareholder lawsuit accusing Heilig–Meyers’ auditors of violating Rule 10(b)(5) of the Securities Exchange Act of 1934. Students evaluate the plaintiffs’ charges and the defenses the auditors used to have most of the complaint dismissed.
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