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Second Circuit expands auditors' liability for securities fraud.

Publication: Trial
Publication Date: 01-JUN-07 		Format: Online
Delivery: Immediate Online Access

Article Excerpt
In a ruling that has already sent tremors through the accounting industry, the Second Circuit has ruled that accountants can be held liable for securities fraud if they fail to correct faulty financial reports. In agreeing with the plaintiff's claim that an accounting firm violated the Securities Exchange Act and a Securities and Exchange Commission (SEC) rule by misrepresenting a company's financial position, the court acknowledged that it was striking new legal ground.

"[F] or many years," Justice Chester Straub wrote for the court, "we have recognized the existence of an accountant's duty to correct its certified opinions, but never squarely held that such a duty exists for the purposes of primary liability under...

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