Accounting firms have frequently found themselves in the cross-hairs of class-action lawsuits filed by shareholders over their audits of public companies, but that trend may be changing.
NERA Economic Consulting found that no accounting firm has been named as a defendant so far this year in a federal securities fraud lawsuit, according to
NERA also found in its
One reason for that sharp decline may be the Supreme Court’s ruling in 2008 in the case Stoneridge Investment Partners LLC v. Scientific Atlanta Inc., which raised the bar for recovering damages from third parties in securities fraud lawsuits.
Another factor could be the work of the Public Company Accounting Oversight Board, which was established 10 years ago by the Sarbanes-Oxley Act to regulate auditing firms in the wake of the demise of Arthur Andersen.
The PCAOB’s periodic inspections of accounting firms’ audits of public company clients may be a painful experience for the firms to endure. But the findings could also be saving the firms millions of dollars they would have to otherwise spend on fighting and ultimately settling shareholder lawsuits over any perceived lapses.