Ernst & Young Sued For Its Computer Associates Audit

Dallas investor Sam Wyly has filed a lawsuit against Ernst & Young LLP, claiming that the firm's audit influenced him to sell his software company in exchange for stock in Computer Associates International Inc.

Ernst & Young was the auditor for both companies when Sterling Software Inc., which Wyly headed, was sold to Computer Associates for $4 billion in March 2000, the Wall Street Journal reported.

Wyly's suit said he depended on Ernst & Young's fiscal 1999 audit to make the decision to sell, but a month after the sale, Computer Associates' share price plummeted 12 percent in one day when the company delayed reporting its year-end earnings, the Journal reported. The stock dropped again later after Computer Associates' sales fell short of forecasts.

Ernst & Young "specifically supplied assurances as to the accuracy of CA's financials to Sterling Software and Sterling's Board and shareholders," the suit says.

In the end, a $2.2 billion accounting scandal engulfed Computer Associates, leading to the indictment of chief executive officer Sanjay Kumar and other executives.

Wyly wants $80 million or more from Ernst & Young, the suit says. Wyly also filed a lawsuit seeking five seats on Computer Associates' board in 2001, but he dropped the suit in 2002 after Computer Associates agreed to pay him $10 million and improve governance practices.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.