The company that I decided to go with is Tesla Inc. Between September 1st, 2016,
and October 2016 5th, 2016, seven lawsuits were filed in the Delaware Court of Chancery
by the stockholders of Tesla that challenged the acquisition of SolarCity Corporation.
They claimed that the board members breached their fiduciary duties, and while the
company filed a motion to dismiss this was rejected by the judge in these cases. While
they had a case set for trial on March 2020, COVID-19 fears caused this to be delayed
until much later Eventually these were all dismissed by the judge with “prejudice”. This
means that it cannot be retried in court again. This contingency couldn’t properly be stated
and was in the footnotes as a result.
a a a a There are many procedures that an auditor might use to search for contingent
liabilities such as breach of fiduciary duties. Auditors should always take the time to
review any contracts or legal documentation regarding property acquisition and executive
compensation. Reviewing the minutes of the board meetings is an effective way to
monitor and identify potential breaches of contracts and understand future potential
lawsuits.
References
• Tesla SEC Filing 10-K for December 31, 2021. 10-K. (n.d.). Retrieved October 12,
2022, from
https://www.sec.gov/Archives/edgar/data/1318605/000095017022000796/tsla-
20211231.htm
