Reference no: EM131662380

Question: Accountant's Liability under the Private Securities Litigation Reform Act. Solucorp Industries, Ltd., a corporation headquartered in New York, develops and markets products for use in environmental clean-ups. Solucorp's financial statements for the six months ending December 31, 1997, recognized $1.09 million in license fees payable by Smart International, Ltd. The fees comprised about 50 percent of Solucorp's revenue for the period. At the time, however, the parties had a license agreement only "in principle," and Smart had made only one payment of $150,000. Glenn Ohlhauser, an accountant asked to audit the statements, objected to the inclusion of the fees. In February 1998, Solucorp showed Ohlhauser a license agreement backdated to September 1997 but refused to provide any financial information about Smart. Ohlhauser issued an unqualified opinion on the 1997 statements, which were included with forms filed with the Securities and Exchange Commission (SEC). The SEC sued Ohlhauser. What might be the basis in the Private Securities Litigation Reform Act for the SEC's suit? What might be Ohlhauser's defense? Discuss.