PKF AND BDO could be sued for their part in the audit of China Expert Technology, which has been accused of fraud worth $132m (£81.78m).
Shareholders have tried three times to bring a case against the auditors for failing to detect the alleged scam. US district judge Alvin Hellerstein in New York threw out the case repeatedly but has now allowed it to continue, Reuters reports.
He decided “enough has been alleged to make a plausible claim for relief”, potentially laying open PKF Hong Kong, PKF New York and BDO McCabe Lo to costly repercussions.
Injured parties are unable to claim directly against China Expert Technology because it never responded to investors’ allegations in court and was found to be in default in 2008.
Similar accounting problems have surfaced in Chinese companies listed in the US, which often lack insurance coverage and can dodge US judgments because they operate primarily from China.
Neither PKF International nor BDO International were available for comment at the time of writing. The case will now proceed to the next stage.
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