Assessment of Alleged Audit Failures in a Billion-Plus-Dollar Venture Backed Bankruptcy
Brattle was retained on behalf of a Big Four accounting firm in an arbitration matter in which the plaintiffs alleged that the firm’s audits of a failed venture-backed construction company were deficient and led to investors’ losses of over $1 billion. The matter involved complex US GAAP and GAAS topics, including the application of percentage-of-completion accounting, the disclosure of related-party transactions, the analysis of goodwill impairment indicators, and the audit firm’s going-concern procedures.
Brattle supported an expert, a former audit partner, who assessed the audit firm’s response to several key issues, including the high uncertainty of projections, evolving internal controls, substantial acquisitions, and reliance on external financing. Brattle’s expert found that the company’s accounting complied with GAAP and that the audit firm complied with GAAS. The matter settled favorably for the firm.
