Deloitte's key auditor defense strategy might crumble

“Equal fault” principle may not pass muster

On Monday, news broke that accounting and consulting firm Deloitte Touche Tohmatsu Ltd. was named in two lawsuits alleging it failed to detect fraud during a nine-year span of audits of the now-collapsed Florida mortgage company Taylor Bean & Whitaker. But experts aren’t so sure that Deloitte will successfully defend itself if it uses a common auditor defense strategy in securities fraud cases.

A key defense among the "Big Four" auditing firms—Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers—is “in pari delicto,” or equal fault principle, in which a defendant auditor alleges that an audited company is just as much to blame for purported wrongdoing.

Ashley Post

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