Both public and private companies face constant scrutiny from a myriad of stakeholders including competitors, regulators, government entities and shareholders. Those same stakeholders also tend to look to a company’s accountants when allegations of financial reporting irregularities are raised to understand whether the accountant contributed to such irregularities by not adhering to strict and highly complex professional standards.
Hemming Morse’s professionals are particularly well positioned and experienced to assist in investigations dealing with claims of corporate fraud or audit malpractice. Our clients benefit from the investigative expertise of a staff of seasoned professionals to conduct appropriate investigations, report findings, consult with counsel and testify in both civil and criminal proceedings, if necessary.
We also regularly provide an objective and knowledgeable assessment of whether such standards have been met. Our firm has assisted in both the defense of accounting firms against allegations of malpractice and in the prosecution of such claims. Our clients have included local, regional, national and international firms. In addition, Hemming Morse boasts extensive experience in the area of litigation consulting. This dual perspective enables us to present objective assessments of the issues being addressed and to explain their intricacies to non-accountants.
Audit Failure Involving Revenue Recognition Issues
Hemming Morse assists SEC as expert in fraud case against Xerox, prompting favorable settlement.
Hemming Morse was retained by the SEC as an expert on accounting principles and auditing standards in their investigation of both Xerox and its auditors for fraud in connection with the company’s financial statements. The investigation arose in connection to restatements totaling $6.1 billion of revenue and $1.9 billion of earnings involving transactions in five countries. The auditors of Xerox, including certain named individuals, eventually settled with the SEC. Such settlements included historically significant penalties for the audit firm and the individual auditors.
Calculation of Damages in Connection with an Audit Failure
Hemming Morse team uses innovative method to significantly lessen damages attributable to accounting firm in audit failure.
Hemming Morse assisted defense counsel for a “Big Four” accounting firm against claims brought by the city of San Jose. The city alleged improper activity by several of the nation’s largest brokerage houses, as well as an audit failure by the “Big Four” firm that resulted in a $75 million bond portfolio loss. Our team recreated the city’s trading portfolio and – using an innovative damages model – demonstrated to the jury that only approximately $575,000 was allocable to the “Big Four” firm.
Audit Failure Involving Revenue, Receivables and Inventory Issues
Hemming Morse’s expert testimony leads to company’s successful settlement with auditors.
In an action brought by holders of MiniScribe bonds, the company’s underwriters retained Hemming Morse to testify regarding shortcomings in the work performed by MiniScribe’s auditors. Testimony given by our designated expert focused on inventory and reserve issues, as well as revenue-recognition schemes. The jury’s $535 million verdict led to a settlement with the auditors.