“Human nature is to validate your own work,” says Joel Greenberg, partner with Kaye Scholer. That’s largely because firms may not be as eager to second guess their original audits. However, a number of lawyers not involved in the Delphi case agree that, at least theoretically, there are potential conflicts when these situations do arise. “In a bankruptcy that in large part is caused by some sort of financial fraud, you have accountants who were asleep at the switch still there trying to get them out of bankruptcy,” says Jay Eisenhofer, partner at Grant & Eisenhofer, the other co-lead counsel for the institutions.Ĭompliance Week could not find any data or studies illustrating how frequently accounting firms signed off on the financials of company, and then remained on the job after the company was embroiled in an accounting scandal and during bankruptcy proceedings. They are auditing themselves.” Plaintiffs include the Teachers’ Retirement System of Oklahoma, the Public Employees' Retirement System of Mississippi, an Austrian mutual fund manager, and a pension fund in the Netherlands. “Part of the responsibility of the auditors is to evaluate what went wrong before. “Why retain an auditor that was so incompetent it missed one of the longer accounting frauds?” asks John Coffey, partner with Bernstein Litowitz Berger & Grossmann, and a co-counsel for the plaintiffs. “In fact, Deloitte has strong incentive to conceal pre-petition accounting and auditing problems, and to minimize its own liability.” “The more Deloitte were to discover about Delphi's past accounting problems, the more it would implicate itself for having failed to detect them at the time,” the funds wrote in their court filing, according to The Wall Street Journal. have asked the judge presiding over the company’s bankruptcy proceedings to disqualify Deloitte & Touche from continuing to audit the auto-parts maker's financial statements, citing a potential conflict of interest. A group of large institutional investors who are suing Delphi Corp.
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