Certification of inaccurate accounts and the liability of statutory auditors

Issue

Several companies placed in compulsory liquidation and belonging to a group specialising in international handling and transport had, over several financial years, presented audited accounts free from qualification. These accounts, although irregular, misleading and inaccurate, had failed to reveal fraudulent concealments and accounting manipulations attributable to the salaried managing director. This situation directly raised the question of the role and failings of the statutory auditors in carrying out their certification duties. The firm Cahn Wilson has been instructed by the liquidator to hold the statutory auditors liable.

Challenges

It was not merely a matter of identifying accounting irregularities, but of demonstrating a link between the shortcomings in the audit engagement and the losses suffered. The challenge lay in establishing the professional liability of the auditors, despite the technical nature of the applicable legal and evidential framework. It had to be shown that the anomalies should have been detected and that their failure to be disclosed had contributed to the financial losses, in a context where internal fraud further complicated the analysis.

Solution

The Cahn Wilson firm structured a liability claim based on a detailed analysis of the statutory auditors’ obligations and the alleged breaches in the performance of their duties. In particular, the firm:

• Reconstructed the successive failures in the certification of the accounts and highlighted the failure to detect material misstatements,
• Demonstrated the shortcomings and linked them to the losses suffered,
• Held the statutory auditors professionally liable,
• Sought compensation for damages.

The firm’s structured approach illustrates how a rigorous legal strategy can establish liability in technical and contentious situations.