The rise and fall of Heilig-Meyers

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.