Robert Bily

Brief of:

Robert. R. Bily (Plaintiff)

v.

Arthur Young and Company (Defendant)

PARTIES

Robert R. Bily, plaintiff, is filing this case against the defendant for professional malpractice action against independent auditor that examined corporation’s books prior to public offering.

Arthur Young, defendant, is an accounting firm asked to examine the books of Robert R. Bily.

STATEMENT OF FACTS

Adam Osborne manufactured the first portable personal computer in 1980 for the mass market. Shipments began in 1981 and in fall of 1982, sales of the Osborne I computer reach $10 million per month. Late 1982, the company began planning for an early 1983 initial public offering of its stock, engaging three investment banking firms as underwriters. Arthur Young had performed an examination of the accompanying financial statements in accordance with the accounting profession’s “Generally Accepted Auditing Standards” (GAAS); the statements had been prepared in accordance with “Generally Accepted Accounting Principles” (GAAP); and the statements were “presented fairly” the company’s financial position. The statement showed a net operating loss of $1 million on $6 million dollars of sales. Another statement showed net operation profit of $69,000 on sales of more than $68 million. The underwriters suggested that the public offering was postponed for several months, because of “uncertainties” caused by the company’s employment of a new chief executive officer and its plans to replace a new computer to replace the Osborne I. The plaintiffs in this case were investors in the company. Robert Bily, who was also a director in the company, purchased 37,500 shares of stock from company owner Adam Osborne for $1.5million. The public offering never materialized. The company filed for bankruptcy on September 13, 1983. Plaintiffs eventually lost their investments. Expert witness, William J. Baedecker, reviewed the 1982 audit and identified more than 40...