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November 21, 2012

Judge rules in Deloitte’s favour in Longtop case

A US district judge has rejected claims that Deloitte Shanghai misled Longtop Financial Technologie’s shareholders by certifying the company’s books.

Longtop,US-listed Chinese software company, has been at the centre of an accounting scandal since Deloitte quit as the company’s auditor last year, when it discovered Longtop had falsified financial records following short-seller Citron Research’s report questioning Longtop’s high margins.

Longtop shareholders alleged that, had Deloitte audited Longtop to generally accepted auditing standards, it would have found that Longtop’s financial statements did not fairly present the company’s business and operations.

 

However, in her 40 page opinion, US District Judge Shira Scheindlin rejected these claims, instead arguing that Longtop had "duped" Deloitte, as Deloitte had argued in its resignation letter in 2011.

This might not be the end of the legal battle for Deloitte as Scheindlin has allowed the plaintiffs to appeal the opinion.

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