In a half-empty/half-full ruling for KPMG, a New Jersey appeals court on Thursday found sufficient evidence that the accounting giant was negligent in its audits of the books of a ceramic collectibles company but inadequate proof to support a $38 million damages award to another company that acquired it.
A three-judge panel said KPMG’s spotty audit of the ceramics company’s books — which should have uncovered vast fraud and irregularities — amounted to malpractice on a non-client, and there was “substantial evidence” that the acquirer and its financial backers relied on KPMG’s audit reports, which is a prerequisite to finding third-party liability.
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