Regulatory Risks Faced By Auditors: The Calm Before The Wave?

Much has been written about the scope of auditor liability. Even more ink has been spilled about the increasing prevalence of civil litigation against auditors and accountants, such as the recent court decisions against the auditors of Livent Inc. and Castor Holdings Ltd., the landmark settlement by the auditor of Sino-Forest Corporation, primary and secondary market class actions against auditors of reporting issuers, and lawsuits by third parties as in the ongoing saga of Philip Services Corp. In our view, the plethora of commentary on auditor liability fails to account for the increasing risks that auditors face from securities regulators.

The Old World Order: auditor oversight was typically left to self-regulatory organizations