Investors Give Courts Fresh Look in Bid to Hold Auditors Liable
Herrick partner, David R. King, was quoted in Bloomberg Law about a lawsuit in which his clients, investors in a now‑defunct hedge fund, successfully sued an auditing firm for negligence, breach of contract and breach of fiduciary duty. The article discusses how this case could alter future auditor liability.
The article notes that David's clients sued an auditing firm and other vendors "after the 2016 collapse of the $1 billion fund, challenging the firm’s assessment of certain hard-to-value assets. The US accounting firm is contesting a New York state court judge’s January ruling that upheld an earlier arbitration panel’s finding that the firm was negligent and issued a judgment in favor of the plaintiffs."
If the award stands up under appeal, it could change the landscape for auditor liability in New York and spark similar suits, said David.
"They’ve built up a wall of case law to try to insulate themselves from audit liability to investors," David said of accounting firms. "This case chips away at that wall."
Read the full article in Bloomberg Law here. Access may require a subscription.