An influential federal appeals court has ruled for the first time that auditors can be liable under securities laws if they fail to correct false financial statements.
A trial judge had dismissed the suit, filed under Rule 10b-5 of the Securities Exchange Act, against an accounting firm, finding that the plaintiffs had failed to state a viable theory of recovery. But the New York-based 2nd U.S. Circuit Court of Appeals said the judge was wrong to conclude that the accountants didn’t face any liability.
