Another audit firm under attack

Feb 3, 2011

In a recent verdict of a nine year legal battle between BDO Seidman and the estate of George Batchelor and the Batchelor Foundation, the jury ordered BDO to pay $91.7 million in damages for fraud and negligence over the firm’s auditing of Grand Court Lifestyles Inc, a company in which Batchelor had made substantial investments. Grand Court went bankrupt leading to huge losses for the investor.

The lawsuit accuses BDO of careless auditing practices of Grand Court, a company engaged in servicing, acquisition, development, and management of senior living communities. An interesting factoid is that prior to hiring BDO Grand Court had fired their auditor Deloitte & Touche because the auditing firm did not agree with Grand Court about accounting procedures and insisted on appraising the value of all of Grand Court’s multi-family homes, rather than just a sampling of properties. Allegedly BDO agreed to use the less costly method of sampling and so they were brought in to replace Deloitte.

Digimarc replaces its auditors

Jan 10, 2011

Digimarc Corp. , a technology firm that makes digital watermarks, has replaced its auditor, Grant Thornton. The reason, Digimarc and its auditors are unable to reach an agreement on how to account patent licencing revenue.

In October 2010, Digimarc licensed a substantial portion of its patent portfolio to Intellectual Ventures for a $36 million fee and 20 percent of future profits from the patents.

The company filed an 8K on December 27, 2010 in which it states that “during 2010, there was one disagreement with GT on a matter of accounting principles in which GT communicated that it disagreed with the Company’s proposed accounting treatment concerning revenue recognition related to the patent licensing arrangement entered into between the Company and IV Digital Multimedia Inventions, LLC, an affiliate of Intellectual Ventures (“IV”), on October 5, 2010. ” (as stated in the 8K)

The company has hired KPMG as its new auditor.