HealthSouth, Inc.: An Instructional Case Examining Auditors’ Legal Liability

• In Event: Auditor Liability

Abstract

This instructional case explores auditors’ legal liability under the Securities Exchange Act of 1934 by asking students to assume the roles of either the plaintiff’s (investors’) or defendants’ (Ernst & Young) legal counsel. By using publicly available documents and testimony (provided on a dedicated website for this instructional case) in their arguments, students are not only exposed to the plaintiff’s burden of proof and defendant’s defenses in a Rule 10b-5 action, but also explore in depth one of the more egregious accounting scandals of the past decade. Survey results of students after completing the case indicate that case objectives are met. Students also report that they enjoy the unique case materials and would enjoy other cases using similar types of materials.

Authors

• Ronald J Daigle, Sam Houston State University

• Timothy J Louwers, James Madison University

• Jan Taylor Morris, Sam Houston State University