A major focus of the lawsuit that Chevron Chemical filed against Touche Ross was the auditing profession's rules regarding the "subsequent discovery of facts existing at the date of the auditor's report." Those rules distinguish between situations in which a client cooperates with the auditor in making all necessary disclosures and situations involving uncooperative clients. Briefly summarize the differing responsibilities that auditors have in these two sets of circumstances.

AFS filed for bankruptcy in April 1987. The company's president filed for personal bankruptcy approximately two years later. In early 1989, Chevron Chemical sued Touche Ross, alleging that the accounting firm negligently audited AFS's 1985 financial statements. Chevron Chemical also claimed that Touche Ross had a responsibility to notify it after learning of the error in AFS's 1985 financial statements.

A Wisconsin state court rejected the allegation that Touche Ross negligently audited AFS in 1985. However, the court ruled, and a Wisconsin state appellate court later agreed, that Touche Ross "was negligent as a matter of law in failing to notify plaintiff [Chevron Chemical] of the withdrawal of their opinion." The original state court awarded damages of $1.6 million to Chevron Chemical.