As more hedge funds are forced to liquidate hard-to-value assets, auditors and administrators’ handling of valuations is under scrutiny. A court win by Ernst & Young in New York, however, has provided some relief to accountancy firms at least.
In 2002, Beacon Hill Master hedge fund, having lost about $300 million, was charged with inflating the value of its mortgage-backed securities portfolio. Denying wrongdoing, managers settled the case in 2005 for $4.4 million.
However, when liquidators attempted to reclaim the lost millions, they targeted auditor Ernst & Young, alleging that the firm had performed a deficient audit that contributed to the fund’s collapse.
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