Independent auditors can be held liable for a corporate client’s fraud, even if they did not participate in or have direct knowledge of the misconduct, the New Jersey Supreme Court ruled on June 28.

“[W]hen an auditor is negligent within the scope of its engagement, the imputation doctrine does not prevent corporate shareholders from seeking to recover,” Justice James Zazzali wrote in NCP Litigation Trust v. KPMG LLP, A-19-04.

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