In a high-stakes legal twist shaking the auditing world, the U.S. Supreme Court on Monday refused to hear BDO USA LLP’s appeal in a case the firm warned could create a “dangerous precedent” for public-company auditors. The decision leaves intact a Second Circuit ruling that allows a securities fraud lawsuit against the firm to advance, keeping the accounting heavyweight firmly in the legal spotlight.
Background: A $22 Billion Insurer’s Financial Restatements
The case traces back to AmTrust Financial Services Inc., a New York-based insurer that was forced to issue a series of financial restatements dating back to 2012—moves that sent its stock tumbling. Investors alleged that BDO, which audited AmTrust’s 2013 financials, contributed to the chaos by falsely claiming that its audit complied with the Public Company Accounting Oversight Board’s professional standards.
The investors filed suit in 2020, accusing the firm of securities fraud tied to AmTrust’s misleading financial statements. BDO, in turn, sought the Supreme Court’s intervention to determine whether an auditor’s assurance of compliance with professional standards could itself form the basis of a securities fraud claim.
