Accountants’ Liability in the Savings and Loan Crisis: An Argument in Favor of Affirmative Defenses

Tuesday, January 1st, 1991 at 12:00 am by Jeffrey N. Leibell
Jeffrey N. Leibell, Accountants’ Liability in the Savings and Loan Crisis: An Argument in Favor of Affirmative Defenses, 1991 Colum. Bus. L. Rev. 71

In the midst of the most recent savings and loan crisis, the federal government is suing auditors of failed thrifts in an effort to recoup losses sustained as a result of alleged negligence. That auditors are being sued for alleged professional negligence is not new. Due to their financial capability to pay damages, auditors are often sued in the aftermath of their clients’ financial collapse when creditors, shareholders and other parties who allegedly suffered economic harm as a result of such collapse assert that their losses were the result of justifiable reliance on negligently audited financial statements. However, auditors are now confronting circumstances unlike any previously encountered. In this financial disaster, which has an estimated cost of $500 billion over decades and involves over 1,800 thrifts, the volume of lawsuits and magnitude of damages sought are potentially life-threatening for the accounting firms involved, as well as for the entire accounting profession as it currently exists.

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