Cast Art Industries, LLC v. KPMG, LLP
New Jersey Supreme Court
36 A.3d 1049 (2012)
Cast Art Industries, LLC (plaintiff) (CAI) relied on audited financial statements prepared by accounting firm KPMG, LLP (defendant) when acquiring another company, Papel Giftware. KPMG began auditing Papel’s financials in 1997 and had already begun auditing 1998 and 1999 statements when CAI started discussing the merger with Papel. CAI’s president testified that a KPMG representative assured him the audits would be forthcoming in a conference call. CAI provided copies of the audited financials to the bank to obtain a $22 million loan to finance the acquisition. Soon thereafter CAI had trouble collecting Papel’s reported accounts receivable, then discovered that the 1998 and 1999 statements KPMG audited were inaccurate because Papel regularly accelerated its revenues. CAI brought an accounting malpractice suit against KPMG, arguing its audits should have revealed the irregularities. The jury awarded CAI $31.8 million, but the appellate court partially reversed, prompting a further appeal.
Rule of Law
Holding and Reasoning (Wefing, J.)
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