Grant Thornton will not be held liable for an unqualified opinion it issued on the 1999 financial statements of Daw Technologies.

Daw eventually restated the statements due to accounting problems, but the a federal court of appeals recently ruled that the case's plaintiffs, a trio of institutional investors, made no attempt to determine why the accounting firm's opinion was false or misleading.

The case was filed in April 2003, accusing Grant Thornton and several of Daw's directors of professional misconduct. Three years earlier, Daw had sold convertible securities to the investors, which contained the 1999 statements as part of background information. It wasn't until late 2001 that Daw began revealing the extent of its accounting problems -- after the company's stock price had already taken a hit. The stock was later de-listed.

The appeals court said that auditors don't "guarantee" or "insure" a company's financial statements. The court also noted that even if the audit was found to be false or misleading, the investors would still have to prove why the issued opinion was false or misleading in relation to the audits it performed.

The full opinion is available at www.ck10.uscourts.gov/opinions/05/05-4187.pdf.

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