Florida Firm Finds Compilations Don't Prevent Lawsuits
An Orlando, Florida accounting firm was recently sued after its client went bankrupt -- a familiar scenario for national firms that do audits of public companies. But this suit was different in that it involved a local accounting firm that didn't do anything more than a compilation for the client.
The firm is Averett Warmus Durkee Bauder & Thompson. The lawsuit accuses the firm of compiling a balance sheet for Evergreen Security Ltd. that showed the company was solvent as of May 2000, only months before it went bankrupt with $190 million more in liabilities than assets.
Like other recent lawsuits involving widely visible collapses, this one seems to have involved some pre-bankruptcy management shenanigans. Evergreen was accused of defrauding about 2,000 investors around the world of an estimated $214 million in the biggest fraud against individual investors in Florida history. Five individuals have been convicted of felony charges in the case.
The suit against Averett Warmus accuses the firm of professional negligence and negligent misrepresentation and asks for both actual and punitive damages. James Warmus, a partner in the accounting firm, said, "We believe the filing is baseless."
Mr. Warmus explained, "We did a compilation. It's the lowest level of service an accountant can provide. We did not give an opinion or any other form of assurance on the financial statement." He also said the compilation of the balance sheet for May 30, 2000 was based on data provided by Evergreen's outside management company and was the only work his firm had done for Evergreen.