The number of accounting case settlements in 2013 increased for the second year in a row, but remained low compared with the previous 10 years, according to Cornerstone Research’s latest report, Accounting Class Action Filings and Settlements—2013 Review and Analysis. While the number of securities class action filings that included accounting allegations (47) remained relatively constant in 2013 compared with 2012, the market capitalization losses associated with these filings more than doubled.

More Key Findings

• At 28 percent of all cases, the proportion of accounting cases filed in 2013 reached a 10-year low.
• Plaintiffs alleged internal control weaknesses in over 70 percent of accounting case filings. When accompanied by company announcements reporting the presence of such weaknesses, these cases settle for substantially higher amounts and higher settlements as a percentage of shareholder losses.
• In 2013, the DDL Index™ for accounting case filings reached its highest level since 2008.
• Accounting case filings in 2013 were nearly evenly distributed over seven industry sectors, but the majority of settlement dollars in accounting cases were in the financial sector.
• At 40 percent of all accounting cases, the proportion of filings involving financial restatements in 2013 was higher than in any of the previous five years. The number and proportion of settlements involving restatements, however, were lower than in any of the previous five years.
• In 2013, the proportion of accounting case settlements involving auditor contributions was the highest in several years.
• In contrast to prior years, in which accounting cases represented as much as 97 percent of the total value of case settlements, accounting cases represented only 25 percent of the total value of cases settled in 2013, primarily due to one large non-accounting case settlement.

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Tags: Accounting Class Action Filings, case settlements