The size and scope of the Madoff scandal has left wounded investors with a vast array of potential targets for lawsuits. The merits of any claims will of course have to be considered by the proper authorities. In the meantime the likes of the Telegraph can highlight which firms are in the firing line and speculate whose stomachs might be turning in anxious anticipation.

Remember Andersen…

When accountants are sued in relation to fraud, the spectre of Enron looms large. Arthur Andersen, one of what was then the “big five”, imploded in a matter of weeks after it was revealed in late 2001 that the firm’s US arm had allowed Enron to manipulate its accounts to defer charges that would trigger a write-down. Andersen then shredded several tons of documents in an attempt to conceal its wrongdoing.

Andersen’s collapse highlighted the fragility of a global accountancy partnership. As soon as the extent of the fraud was made public, Andersen’s international divisions and partners not involved in the scandal detached themselves from the firm, making it impossible for Andersen to survive. The nightmare scenario for the big four – PwC, KPMG, Deloitte and Ernst & Young – is to be caught out by the next Enron.

Auditors have always been a target for investors who lose money when a company goes bust, and the firms have insurance against litigation that allows them to settle out of court. But they face bigger and bigger claims in relation to their insurance. Any overspill would threaten partners’ personal wealth if a firm was forced to go to trial and lost.

Du du duuuuuh.

It’s a cruel sport but someone has to.

Billion-dollar lawsuit could destroy top accountancy firms . [Telegraph]