Greedy Trial Lawyer
Accounting Firms Create Immunity For Themselves
Category: Gaming The System
Buried in the wordy provisions of contracts between accounting firms and corporations may be an immunity from liability lawsuits for poor auditing work. This trend is noted by Bloomberg.com in an article that explains why this probably should concern all of us. Just how conscientious will auditors be if they skate free for any shabby or overly cozy conduct?
The biggest U.S. accounting firms, including Ernst & Young LLP and KPMG LLP, have been pressing Congress for more than a decade to protect them from liability lawsuits. Now they're taking matters into their own hands, drawing fire from government regulators and investors.The firms are shielding themselves from financial damages over corporate scandals by requiring companies they audit to limit their right to sue. These waivers of punitive damages and jury-trial rights are tucked into audit contracts, often unnoticed by investors and corporate boards.
Five federal banking agencies say the provisions may lead to less rigorous audits, and are preparing to bar large banks from agreeing to them. Shareholders, including public-employee pension funds in Ohio and Florida, say the agreements may presage a push by the firms to curb investors' right to sue.
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