At least as far back as the Enron scandal and subsequent enactment of Sarbanes-Oxley, accountants and auditors have been viewed as uniquely positioned to serve a crucial watchdog role. Among their many functions, they facilitate transparency and certify the accuracy of companies’ financial statements. However, when a business fails or experiences some other adverse financial event, investors and creditors may look to those same auditors to recover their losses.
Take a recent example from the PricewaterhouseCoopers (PwC) case. After the 2008 housing crash, mortgage company Taylor Bean & Whitaker (TBW) declared bankruptcy. TBW’s bankruptcy trustee subsequently uncovered a multi-billion dollar fraud. The fraud implicated TBW’s founder and executives at Colonial Bank, a lender that supplied loans to TBW.
The bankruptcy trustee sued PwC, who had audited Colonial Bank’s parent company, alleging PwC failed to identify the fraud and instead “certified the existence of more than a billion dollars of Colonial assets that did not exist, had been sold to others, or were worthless.” The trustee’s $5.5 billion demand, in Florida state court, Taylor Bean & Whitaker Plan Trust v. PricewaterhouseCoopers LLP, Case No. 2013-033964-CA-01, makes it one of the largest such cases of its kind. And although it settled in the middle of trial, the case highlights the type of potential exposure and risk auditors and accountants may have when stakeholders rely on them.
Follow me on Twitter: @SP_Slaughter
Take a recent example from the PricewaterhouseCoopers (PwC) case. After the 2008 housing crash, mortgage company Taylor Bean & Whitaker (TBW) declared bankruptcy. TBW’s bankruptcy trustee subsequently uncovered a multi-billion dollar fraud. The fraud implicated TBW’s founder and executives at Colonial Bank, a lender that supplied loans to TBW.
The bankruptcy trustee sued PwC, who had audited Colonial Bank’s parent company, alleging PwC failed to identify the fraud and instead “certified the existence of more than a billion dollars of Colonial assets that did not exist, had been sold to others, or were worthless.” The trustee’s $5.5 billion demand, in Florida state court, Taylor Bean & Whitaker Plan Trust v. PricewaterhouseCoopers LLP, Case No. 2013-033964-CA-01, makes it one of the largest such cases of its kind. And although it settled in the middle of trial, the case highlights the type of potential exposure and risk auditors and accountants may have when stakeholders rely on them.
Follow me on Twitter: @SP_Slaughter
At least as far back as the Enron scandal and subsequent enactment of Sarbanes-Oxley, accountants and auditors have been viewed as uniquely positioned to serve a crucial watchdog role. Among their many functions, they facilitate transparency and certify the accuracy of companies’ financial statements. However, when a business fails or experiences some other adverse financial … Continue reading
The post Auditor Liability: The Case against PwC appeared first on Robins Kaplan Trial Attorneys Blog.
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