Grant Thornton US has lost its appeal to
dismiss a lawsuit filed against it by US headphone manufacturer
Koss Corporations (Koss), after a ruling by the Circuit Court of
Koss filed the suit against its former auditor
Grant Thornton, accusing it of gross negligence for not uncovering
$34m embezzled by former Koss finance vice president Sujata
Sachdeva, who is currently serving an 11 year sentence for the
crime, brought to light by American Express in 2009.
The suit asked the court to order corporate
governance reforms at the company and for any money paid by
defendants in that case to be paid to Koss, according to US media
A Grant Thornton spokesperson told the
International Accounting Bulletin the fraud committed by
Sachdeva and others in the finance function at Koss had hurt a lot
of innocent people, including some of its own staff.
“Fraud always starts with a breakdown in a company’s internal
control system – breakdowns that may not be detected even by a
financial statement audit done in accordance with professional
standards. This is why [Grant Thornton] have advocated for so long
that all public companies should be required to have an independent
audit of their internal control systems under Sarbanes-Oxley
Section 404(b) – a requirement that was publicly argued
against by Koss’ management,” the spokesperson added.
Koss also has suits pending against firms that
were involved in payments using embezzled funds. A suit against
American Express was dismissed earlier this year.