Fewer Accounting Lawsuits but Bigger Consequences in 2025

Written By Eszter Rapanos

Accounting lawsuits in the US are dropping, but the cost of getting it wrong is rising fast. At first glance, the latest US data looks like good news with fewer accounting-related lawsuits, less noise, less pressure. But when you look closer, a different picture emerges. The risk hasn’t gone away, it’s just become more concentrated, and more expensive.

Fewer cases, but higher stakes

According to a 2025 report by Cornerstone Research:

  • Accounting-related class actions dropped 40% (from 57 to 34 cases)

  • This is the lowest level recorded since 2004.

But at the same time:

  • Total settlements increased 40% to $1.5 billion

  • Accounting cases made up more than half (51%) of all settlement value.

In summary, there are fewer cases, but when they happen, they are bigger.

Larger companies are being targeted

Another clear trend is who is being sued. Litigation is focusing on fewer, high-value targets rather than many smaller ones:

  • The companies involved are larger than before

  • Median company size exceeded $1 billion

  • AI-related cases involved businesses four times larger than others.

GAAP remains central

Technical accounting is still at the centre of these cases.

  • 97% of filings included GAAP violations

  • The highest level seen in a decade

  • 83% of settlements also involved GAAP issues

The most common issue relates to asset valuation and impairment.

Less focus on internal controls

One notable change:

  • Only 38% of cases included internal control weaknesses

  • The lowest level since 2009.

This suggests a shift away from control failures toward accounting judgments and estimates. That places more pressure on how decisions are made and documented.

New risk areas are emerging

A growing portion of cases now involve newer sectors:

  • Artificial intelligence

  • Cryptocurrency

  • Special Purpose Acquisition Companies (SPACs)

These made up 24% of cases in 2025, up from 14% in 2024.

These areas often involve:

  • Uncertain valuations

  • Rapid growth assumptions

  • Limited historical data

All of which increase accounting risk.

Cases take longer and cost more

The financial impact is also increasing:

  • Average time to settle: 4.1 years

  • Median settlement: $17.1 million

  • Five mega settlements (over $100 million) made up nearly 60% of total value

  • Estimated investor damages increased 153%.

This shows that when issues arise, they take longer to resolve and cost more to settle.

The role of short sellers

Short sellers are investors who make money by betting that a company’s share price will fall. They often publish detailed reports highlighting suspected problems - such as overvaluation or questionable accounting to trigger a market reaction. These reports can draw attention from regulators and lawyers, sometimes leading to investigations or lawsuits, even though the short sellers themselves do not determine the final outcome of those cases.

Short-seller reports are playing a bigger role with accounting cases five times more likely to reference them. However, these cases did not necessarily result in higher settlements. This suggests short sellers often trigger investigations, even if they don’t determine the final outcome.

What this means for the profession

The key takeaway is simple: the nature of risk is changing:

  • Fewer cases

  • Larger companies

  • Greater focus on accounting judgment

  • Higher financial consequences

This is not a reduction in risk, it is a shift in where and how that risk appears.

What about South Africa?

South Africa does not have the same level of class-action activity as the US. We don’t have:

  • The same volume of class actions

  • The same litigation culture

  • The same settlement scale.

But we do have:

  • Increasing regulatory pressure

  • Growing complexity in valuations and reporting

  • Clients entering AI, crypto, and informal high-risk sectors.

And most importantly, we have small practices carrying massive responsibility with limited protection.

In the US, large firms face large lawsuits. In South Africa, the burden often falls directly on the practitioner:

  • Compliance penalties

  • Client disputes

  • Professional risk.

The exposure is different, but it is still real.

Final thought

This is not about more cases.

It’s about higher consequences when things go wrong.

As accounting becomes more judgment-based, the ability to support, document, and defend decisions becomes critical.

Eszter Rapanos
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