BDO’s “Dangerous Precedent” Argument
BDO’s petition, filed in May, argued that the Second Circuit’s revised opinion from last year had “adopted an unprecedented per se rule” — effectively declaring that an auditor’s claim of compliance is always material to investors. The firm cautioned that such reasoning could open the floodgates, potentially exposing nearly half of all public company audits to securities fraud litigation.
The firm maintained that it quickly caught and corrected missing audit procedures in the AmTrust review, insisting that the omissions had no impact on the audit’s integrity.
SEC Sanctions Add Fuel to the Fire
The case’s tension deepened when the U.S. Securities and Exchange Commission temporarily barred three former BDO accountants in 2018 from auditing publicly traded companies. The SEC found that the team had issued an AmTrust audit report before completing all required audit work, a move that cast long shadows over BDO’s defense.
Investors Push Back
The plaintiff investors countered that BDO exaggerated the scope of the Second Circuit’s decision. In their Supreme Court response, they argued that the ruling didn’t establish a sweeping rule, but simply found that—based on the case’s facts—BDO had failed to show its statements were immaterial enough to warrant early dismissal.
They also rejected BDO’s warnings of industry-wide fallout, calling them “dire predictions based on a misreading” of the appellate decision.
