Accounting Profession Defense

Hunton & Williams litigators have represented the accounting profession in courts and before regulatory bodies for decades.

Our lawyers have counseled major national accounting firms as well as individual accountants in Securities and Exchange Commission (SEC) investigations, state board of accountancy matters, audit malpractice litigation in state and federal courts, securities class actions and disputes with audit clients.

Our team has represented accountants in regulatory matters relating to some of the largest domestic and international accounting scandals in history. In the past decade, we also worked on the cutting edge of complex accounting standards, including standards relating to the value of mortgage-related derivatives and other “Level 3” assets.

Among our successes are trying cases on behalf of accounting firms to verdict. On multiple occasions, our lawyers have prevailed against the emerging group of plaintiff’s lawyers who focus entirely on accounting firms.

Our lawyers have worked closely with the accounting profession, having also assisted the American Institute of Certified Public Accountants in preparing amicus briefs and evaluating legal developments impacting the profession.

Our team’s thorough understanding of the audit process, GAAP and GAAS enables us to explain professional standards in courtrooms, in conference rooms at the SEC and in other venues.

Related Experience

Regulatory Investigations

  • Defense of Big Four firm in an SEC investigation relating to audit client’s earnings-manipulation scheme that resulted in criminal convictions of audit client officers. The SEC matter was terminated with no finding of liability against firm or individual auditors.
  • Defense of Big Four firm in an SEC investigation following audit client’s restatement and bankruptcy. The matter was terminated with no finding of liability against firm or individual auditors.
  • Defense of company CFO, controller and accounting staff in SEC investigation relating to the disclosed value of a $2 billion portfolio of mortgage derivatives. After three years of investigation, the matter was terminated (pre-Wells) with no finding of liability against our clients.
  • Represented Big Four accounting firms in numerous state board of accountancy investigations involving an array of financial reporting issues, including independence, auditing and tax matters.
  • One of our lawyers served as an associate director at the Public Company Accounting Oversight Board, where he was involved in international auditor oversight and standard setting.

Federal and State Litigation

  • Defense of Big Four firm in lawsuit brought in the Southern District of New York by an acquirer based on the accounting firm’s preparation of a closing balance sheet for purposes of the acquisition. Acquirer alleged that accounting firm committed fraud in its preparation of the closing balance sheet. Firm’s motion to dismiss was granted.
  • Defense of a national accounting firm against claims for fraud and negligent misrepresentation brought in California state court by broker-dealers who sought more than $100 million based on the firm’s alleged role in a $2 billion Ponzi scheme. After defeating several of the group’s claims on summary judgment, the remainder proceeded to trial, which commenced with a multi-day evidentiary hearing on a motion to strike the broker-dealers’ damages expert and corresponding damages claims. The court granted the motion, and having no damages expert for trial, the broker-dealers settled on confidential terms.
  • Defense of Big Four accounting firm against RICO claims brought by a well-known country and western recording artist.
  • Defense of Big Four firm in connection with a trustee lawsuit alleging the auditors hid the client’s debts and improper business practices, and seeking more than $380 million in damages. On the eve of trial, we obtained an extremely favorable settlement.
  • Defense of national accounting firm against claims brought in California state court by a group of investors in a Ponzi scheme who were seeking to hold the accountants liable for their investment losses of approximately $20 million, plus punitive damages, based on tax work performed for the alleged fraudulent entity and perpetrator of the fraud. After a two-week trial, the jury found in favor of the accounting firm, and the case was recognized by the Daily Journal, California’s leading legal publication, in its annual listing of the top ten defense verdicts.
  • Defense of Big Four firm in connection with a claim by a client alleging that the firm was negligent in failing to detect fraud and seeking damages in excess of $1 billion. The case was settled on favorable terms.
  • Defense of Big Four firm in private malpractice lawsuit brought in New Jersey state court by acquirer of accounting firm’s audit client. Acquirer alleged that accounting firm’s audits were deficient for failing to detect audit client’s financial statement fraud. Case was terminated with no liability to accounting firm.
  • Defense of national accounting firm in derivative lawsuit alleging claims of audit malpractice and aiding and abetting breach of fiduciary duty following audit client’s restatement.
  • Defense of national accounting firm in multiple litigation matters relating to firms audit work for municipalities.

Internal Investigations Relating to Accounting Irregularities

  • Represented Big Four firm in discussions with audit client regarding suspected financial fraud. Shadowed audit committee investigation conducted pursuant to 10A.
  • Conducted special litigation committee investigation at Fortune 50 financial services firm relating to fair market values ascribed to residential mortgage-backed securities and related derivatives.
  • Conducted internal investigation at Fortune 50 financial institution relating to double-pledging of mortgages and the collapse of nation’s largest nonbank mortgage lender.
  • Conducted audit committee investigation at national transportation company relating to alleged premature revenue recognition.