IKON Office Solutions Inc. paid $111 million to settle a shareholders’ suit that accused the company of overstating its income, but a federal appeals court has now ruled that the same investors don’t deserve a penny from the accounting firm of Ernst & Young because they simply have no evidence that its audit was performed recklessly.
“There is no reasonable basis in the record to doubt that [E&Y] harbored an honest and well-founded belief in the accuracy of its audit, and, without further substantiating evidence, a jury may not premise a finding of willful or knowing conduct to defraud or recklessness merely by judging between competing but nevertheless sound accounting methodologies,” U.S. Circuit Judge Morton I. Greenberg wrote.
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