On May 9, 2025, BDO USA, LLP filed a petition for a writ of certiorari urging the Supreme Court to hear a case decided by the Second Circuit which, BDO argues, could have “devastating” consequences for “the public markets and the accounting profession.” According to BDO, the Second Circuit’s decision is in direct conflict with Sixth Circuit precedent and threatens to subject nearly half of all public-company audits “to potential auditor liability for making materially false statements merely by certifying compliance with PCAOB standards—no matter what impact the alleged audit deficiency may have on investors.”

 

As we previously reported in the November 1, 2024, Auditor Liability Bulletin, in New England Carpenters Guaranteed Annuity and Pension Funds v. AmTrust Financial Services, Inc., No. 20-1643-cv (2d Cir. 2024), the Second Circuit initially held that BDO’s alleged misstatements in its 2013 audit opinion that the audit was conducted in accordance with PCAOB standards when the Complaint alleged that the Engagement Partner and another BDO partner on the engagement failed to complete work papers prior to issuing the audit opinion, signed audit work papers without reviewing them, and failed to verify the completion of audit work prior to issuing the opinion, among other failures, were not material and thus insufficient to state a claim against BDO. However, in the amended Opinion, and “after due consideration of Appellants’ petition for rehearing,” the Second Circuit reversed course, holding that the misstatements were indeed material because the false certification with respect to conducting the audit in accordance with PCAOB standards “subjected unknowing investors to the risk that AmTrust’s financial statements were unreliable.”

 

In its petition for a writ of certiorari, BDO urges the Supreme Court to consider whether the materiality requirement for securities fraud liability is satisfied per se by an auditor’s statement of compliance with professional standards or whether a fact-specific analysis focused on the link between the allegedly false compliance statement and actual misstatements of financial information is required.

 

The case is BDO USA, LLP, v. New England Carpenters Guaranteed Annuity and Pension Funds et al., case number 24-1151, before the Supreme Court of the United States. The petition for a writ of certiorari can be found here.