AICPA Files Successful Friend-of-the-Court Brief in Suit Against CPA Firm.

• Author: Miller, Richard I
• Position: American Institute of Certified Public Accountants - Brief Article

AICPA Files Successful Friend-of-the-Court Brief in Suit Against CPA Firm

The AICPA's legal Department routinely files amicus curiae briefs in matters which may affect the CPA profession. Recently, the Institute (represented by the law firm of Allegaert Berger & Vogel LLP) filed a successful brief on behalf of an accounting firm in a lawsuit filed against it by the Securities Investor Protection Corporation (SIPC).

On Feb. 20, the New York Court of Appeals (New York's highest court) unanimously rejected an attempt by SIPC to broaden significantly the scope of accountants' liability under New York law. The case, SIPC v. BDO Seidman, LLP, arose from BDO's audit of the 1993-1995 financial statements of the broker-dealer A.R. Baron & Co. The Security Investor Protection Act requires broker-dealers to provide their audited financial statements to the SEC and the NASD, and requires those organizations to advise SIPC if they learn that a broker-dealer is in or approaching financial difficulty. The statute does not provide for SIPC itself to receive the audit reports. After Baron's eventual liquidation, SIPC nonetheless sued BDO to recover its administrative costs, under theories of fraud and negligent misrepresentation. SIPC alleged that BDO's audit reports did not alert the SEC or NASD to Baron's troubles, with the result that neither of those agencies communicated any concern about Baron to SIPC, thereby delaying and increasing the cost of SIPC's...