Opinion ID: 214714
Heading Depth: 1
Heading Rank: 4

Heading: The Restatement and EY Opinion

Text: Broadcom engaged in an improper stock option backdating scheme that required the company to restate its financial statements in January 2007 for fiscal years 1998 to 2005 (the Restatement). The Restatement acknowledged that Broadcom had improperly accounted for $2.2 billion in income, largely due to improper option backdating. Additionally, every financial statement, and quarterly and annual report issued during the time period covered by the Restatement, was false and misleading. As a result, Broadcom agreed to a civil penalty of $12 million in connection with a SEC civil securities fraud investigation, and various Broadcom officers and directors face civil and criminal charges. The crux of Plaintiffs' claim is that EY, in its role of auditor issuing the unqualified 2005 Opinion, knew of, or was deliberately reckless in not knowing, that the 2005 Opinion was materially false and misleading due to Broadcom's stock option backdating scheme. The 2005 Opinion covered three years of Broadcom's financial statements (2003-05), stating that the financial statements present fairly, in all material respects, the consolidated financial position of Broadcom Corporation at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with generally accepted accounting principles [(GAAP)]. The 2005 Opinion also stated that EY had performed the audit in accordance with generally accepted auditing standards (GAAS).