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Chapter 2


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Chapter 2

  1. 1. ACG 5458 CHAPTER 2
  2. 2. Regulatory & Legal Issues <ul><li>Auditors need a working knowledge of regulations and laws so they at least can determine when to refer matters to legal counsel. </li></ul>
  3. 3. Legal Contracts <ul><li>A contract is an agreement between or among two or more persons or entities (businesses, organizations or government agencies) to do, or to abstain from doing, something in return for an exchange of consideration </li></ul><ul><ul><li>Law provides remedies, including recuperation of losses or specific performance. </li></ul></ul>
  4. 4. Three Elements <ul><li>Offer </li></ul><ul><ul><li>Clearly & completely describe services including time, place & quality </li></ul></ul><ul><ul><li>Identify goods including quantity (UCC for sale of goods) </li></ul></ul><ul><li>Consideration </li></ul><ul><ul><li>Statement of what the offeror expects in return from the offeree. </li></ul></ul><ul><li>Acceptance </li></ul><ul><ul><li>Identify offeree </li></ul></ul><ul><ul><li>Best if signed and dated by offeree and offeror </li></ul></ul>
  5. 5. Employment Contracts <ul><li>Unilateral Contract – Employee is not bound </li></ul><ul><li>Cannot include that employee must work for stated period of time </li></ul>
  6. 6. Confidentiality Agreements <ul><li>Employee agrees not to divulge confidential information </li></ul><ul><ul><li>Should describe nature of protected information </li></ul></ul><ul><ul><li>List permissible uses of such information </li></ul></ul><ul><ul><li>Identify remedies for non-compliance </li></ul></ul><ul><ul><li>State term of agreement </li></ul></ul>
  7. 7. Trade Secret Agreements <ul><li>A trade secret reflects a wide array of information that derives independent economic value from not being widely disclosed or readily ascertainable </li></ul><ul><li>Enforceable for indefinite period of time </li></ul>
  8. 8. Discovery Agreements <ul><li>For employees hired to develop ideas and innovations </li></ul><ul><li>Agreement transfers ownership of discovery to employer </li></ul><ul><li>Prevents employees from claiming the discovery as their own property </li></ul>
  9. 9. Non-Compete Agreements <ul><li>Employee agrees to not work for competing employer (including self) for </li></ul><ul><ul><li>Specified time (must be reasonable) </li></ul></ul><ul><ul><li>Specified geography </li></ul></ul><ul><li>Prevents employee from working for other companies in connection with the design or sale of a competitive product. </li></ul><ul><li>Monetary remedy may be awarded to company for violation </li></ul>
  10. 10. Trading Partner Contracts <ul><li>Ratifies agreements between companies & their trading partners with written contracts </li></ul><ul><li>IT auditors examine Trading Partner Contracts as to the sale and purchase of goods and services </li></ul>
  11. 11. Contract Template <ul><li>Document Title </li></ul><ul><li>Unique Number </li></ul><ul><li>Effective Date </li></ul><ul><li>Expiration Date </li></ul><ul><li>Seller & Buyer Name / Address </li></ul><ul><li>Document Purpose </li></ul><ul><li>Authorized Signatures </li></ul><ul><li>Goods/Services Description, Quantity, & Price </li></ul><ul><li>Payment Terms </li></ul>
  12. 12. Contract Template <ul><li>Delivery & Shipping </li></ul><ul><li>Disclosures </li></ul><ul><li>Intended Use </li></ul><ul><li>Warranty </li></ul><ul><li>Liability </li></ul><ul><li>Compliance with Laws </li></ul><ul><li>Export Control </li></ul><ul><li>Information Confidentiality </li></ul><ul><li>Force Majeure </li></ul><ul><li>Penalty / Cancellation Terms Resolution Remedy </li></ul>