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April 29 --Although the number of accounting class action filings in 2013 remained “relatively constant at 47,” the number of accounting case settlements in 2013 increased for the second year in a row to 44--albeit still relatively low compared with the 10-year historical average--according to an April 29 report by Cornerstone Research.
Further, “in a reversal of the typical pattern,” settlement amounts in accounting cases were lower than for non-accounting cases in 2013, according to Cornerstone's Accounting Class Action Filings and Settlements--2013 Review and Analysis.
The report noted that the low number of accounting case filings is “consistent” with overall trends in securities class action filing activity. Further, “at 28 percent of all cases filed,” it said, “the proportion of accounting cases” was at a 10-year low.
In terms of settlement amounts, unlike prior years in which accounting cases represented as much as 97 percent of the value of case settlements, in 2013, accounting cases represented only 25 percent of the total value of settled cases. However, the study noted that “this unusual result was due to the presence of one non-accounting case that comprised more than 50 percent of the total value of cases settled” and therefore, “this change is not expected to indicate a future trend.”
With regard to industries, the report said that in 2013, accounting class actions were “more evenly distributed across industry sectors” with no single industry sector accounting for a majority of case filings. However, the financial sector comprised the largest portion of accounting case settlement dollars--representing nearly 70 percent of the total settlement amount.
In terms of claims, the report said that 40 percent of accounting class actions involved restatements in 2013--higher than any of the previous five years. Similarly, the proportion of filings involving internal control weakness allegations was at a five-year high. Further, “auditors were named as defendants in 12 out of 44 accounting cases that settled in 2013,” the report said.
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