The Miami Herald reports that in the first phase of what is bound to be a long running legal battle, the jury took less than 3 hours to decide it was grossly negligent in failing to detect a fraud which cost Banco Espirito Santo $170 million. The result means BDO could claim up to $510 in punitive damages:
Espirito Santo alleged E.S. Bankest was used to funnel money from the bank’s investor clients. The bank charged that BDO Seidman ”abdicated its professional responsibilities” by failing to ensure the debts owed to E.S Bankest ”were real debts owed by real companies,” according to the lawsuit…
Steven Thomas, a Los Angeles lawyer who represents Espirito Santo, said he was pleased with the verdict.
”BDO’s tactic of blaming everyone else while denying their own responsibility as certified public accountants has failed,” Thomas said.
Regardless of the final outcome, it is yet more evidence that audit procedures are regarded as suspect and that the public is losing confidence in the profession.
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