Data breaches have become an all-consuming topic of late. Stories about data theft dominate political headlines, boardroom discussions and family meetings around the dinner table. They, of course, have also been the subject of government investigations and private litigation.
The current environment is not unlike other moments in the recent past that seem to have captured the attention of Wall Street, K Street and Main Street, including the financial reporting scandals of the early 2000s. During the financial reporting scandals in the early 2000s, regulators and private litigants looked not only to the entities and their executives committing the fraud, but also to the so-called “watchdogs” — financial statement auditors. Plaintiffs alleging securities fraud claimed that the auditor must have known about the fraud, or should have discovered it, regardless of what the fraud was, or whether it touched on a subject within the auditor’s purview.
In response, the accounting profession developed a series of standards that minimized the auditor’s exposure in litigation for things not squarely within the area of an auditor’s responsibility. Click here to read the full article.