Auditor Liability by the Book
Independent auditors play a vital role in our capital markets system. A third party opinion on the representations made in a company’s financial statements serves as assurance of accuracy and transparency, and builds investor confidence.
While erroneous or even fraudulent financial reporting can occur even with a well conducted audit, the failure to comply with professional standards will typically make the auditors vulnerable. An understanding of auditing standards and auditor liability is thus needed to either defend or prosecute accounting professionals.
Dr. Barry Jay Epstein, CPA, CFF, is a leading authority on auditor liability and financial reporting who has consulted and/or testified as an expert witness for plaintiff and defense attorneys in over 120 cases involving securities litigation, white collar defense, financial fraud, and accountants’ malpractice.
Dr. Epstein is the author of The Handbook of Accounting and Auditing, published by RIA, the tax and accounting business of Thomson Reuters. He has been associated with this comprehensive reference work, and its semi-annual updates, for over 18 years. Dr. Epstein also served as the lead author of 26 annual editions of Wiley GAAP (1985 through 2010), 14 annual editions of Wiley IFRS (1997 through 2010), and several other works on U.S. GAAP and international accounting standards, all published by John Wiley & Sons.
Dr. Epstein served as an accounting and auditing expert for the Securities and Exchange Commission in the “Potts decision,” which established that the QC or review partner has the same exact level of responsibility for the audit (and hence for audit failure) as does the audit partner.
The case was upheld by the full commission and then appealed to the Circuit Court in Minneapolis (where the audit failure occurred), which upheld the SEC verdict. Dr. Epstein’s testimony was specifically cited as a factor in the case outcome. Read the Initial Decision in the case Potts v. SEC, which contains multiple references to Dr. Epstein’s expert opinion.
The SS&G team can help you prepare and explain complex accounting matters to the trier of fact in several ways. We are available to:
- Screen thousands of documents quickly to identify crucial evidence
- Draft cross-examination questions that are specific to your case
- Provide technical on-site guidance during depositions
- Prepare persuasive accounting exhibits for courtroom visualization
Read more about our Auditor Malpractice Services. You are invited to contact Dr. Epstein at 312-464-3520 or via email to discuss potential litigation charges involving auditor liability.
Read our Latest Auditor Liability Posts:
The Litigators’ Guide to Auditors’ Malpractice Liability: Internal Controls
Alleged Olympus Accounting Fraud is Common Accounting Scam
MF Global Off-Balance-Sheet Accounting: Déjà vu All Over Again
