Academic journal article Journal of Accountancy

Grant Thornton Allowed Indemnity Claim against FDIC

Academic journal article Journal of Accountancy

Grant Thornton Allowed Indemnity Claim against FDIC

Article excerpt

A federal court in Kansas ruled that Grant Thornton, the auditors of a failed savings and loan, was entitled to indemnity, or a 100% shift in liability from Grant to the FDIC as receiver of the failed institution.

Grant audited the financial statements of Rooks County Savings and Loan Association for the years 1984 through 1986. In 1986, Rooks began experiencing extreme financial difficulties and was subsequently closed by the FDIC.

Rooks and its 100% shareholder, the Comeau family, filed suit against Grant alleging its audits were performed in a reckless and negligent manner.

Specifically, it was alleged that Grant had actual or constructive knowledge that Rook's internal accounting controls were unreliable and certain loans were unacceptably risky, yet Grant's report had said the financial statements for the years 1984 and 1985 conformed to generally accepted accounting principles.

Grant, in its answer to the suit, denied all liability and sought to be indemnified by the Comeaus, Rooks and FDIC (as the successor in the interest to Rooks) for any amount it may be held liable for in the primary claim. …

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