That goes for the rest of you Big 4 and non-Big 4 too! Okay, the report doesn’t come out and state that CPA firms are the ones getting slapped around by plaintiffs but it seems like a logical conclusion since we’re talking about, ya know, accounting.
The PricewaterhouseCoopers report states that of the 155 federal lawsuits in 2009, only 37% of them were related to accounting issues, compared to 41% in 2008. To clarify just a little bit, the decline was because “many of the cases were connected to the financial crisis and tended to focus more on disclosure issues not having to do with whether the defendants followed generally accepted accounting principles.” In other words, the accounting is wrong as much but apparently people are forgetting to bring up certain important details. Like say, repos?
Plus the lawsuits that do involve accounting issues are the most expensive settlements. The reports states that out of the top ten lawsuits, seven of them had an accounting component to them. The total value of settlement in ’09 was $2.3 bil.
So what causes all the problems? Lots of bad guessing for starters. According to the report, 57% of the cases mentioned issues related to estimates, while 43% of the suits cited internal controls. Unfortunately, those two things are right in the wheelhouse of auditors. Bright side is that revenue recognition isn’t citied nearly as much. Don’t let anyone tell you different, screwing up less is a good thing.