BDO International faces audit negligence accusation

Tue Jun 2, 2009 11:58pm BST
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* BDO International accused in auditing negligence case

* Case seen as landmark in global accounting world

* Banco Espirito Santo says damaged by audit negligence

* BDO International says it was just "coordinating entity"

By Pascal Fletcher

MIAMI, June 2 (Reuters) - A Miami jury was told on Tuesday that Brussels-based international accounting network BDO International B.V. was "grossly negligent" for allegedly failing to properly supervise a U.S. member found liable in an auditing malpractice case.

In 2007, BDO Seidman, a member of the BDO International network, was ordered to pay $522 million in compensation and damages after being found negligent by a Miami court for failing to detect fraud in its audits of a financial services company created by Portugal's Banco Espirito Santo (BES.LS: Quote, Profile, Research).

Banco Espirito Santo alleges that BDO International is equally liable as the controlling entity of BDO Seidman, which is appealing the 2007 verdict that it did not carry out proper audits between 1998 and 2002 of Miami-based factoring company E.S. Bankest, at the center of the $170 million fraud.

The landmark case against BDO International is being closely watched in the accounting industry because if the Miami jury finds for Banco Espirito Santo, it will be the first time a global accounting conglomerate is found legally liable for the errors of one of its national members.  Continued...

 
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