So, what is the latest news story about auditors? It involves KPMG and its role as auditor of Lancer Corp., the beverage-dispensing company. The reports are that KPMG has quit as Lancer's auditor and plans to withdraw three years' worth of audit opinions.
The reason given is that KPMG had found likely illegal activities within the company that affect its financial statements and Lancer had not corrected the problems. Attention has been focused on Lancer as a result of the SEC's formal investigation of Coca-Cola.
Isn't it nice that we finally have an auditor who is in the news but is not being sued? The suits filed against auditors of late are typically those that are filed by unhappy investors and/or creditors complaining that the auditor negligently conducted the audit.
Well it looks like we got a tougher auditor here with regard to KPMG. However, I am not so sure, that there won't be a time where companies, not investors or creditors, sue their auditors claiming business injury because of the critical comments and actions of the auditors.
I am unaware of any blanket privilege protecting auditors from this type of lawsuit and I have a strange feeling it doesn't matter how many times the word "allegedly" is used. I can see a lawyer (yes I am one), suing an auditor claiming the auditor does not have the right to make an unjustified accusation even if it was made in the performance of an audit.
Comments on this column from auditors and lawyers alike are invited.
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