Interesting thing about auditing This is a very complex case, but in a really high level way, a financial statement auditor is not expected, by the standards, to detect fraud. This is for a number of reasons - firstly, an audit is designed to detect material misstatement; thus, less significant frauds would not be detected. Secondly, if the fraudster alters documents, colludes, and/or is able to misrepresent transactions to "fool" the auditor, the auditor simply has to demonstrate that appropriate due diligence and professional skepticism was present in the absense of detecting the fraud. I would suspect that the audit firm simply does not see the value in fighting this war in court, and has decided it is most cost effective to settle. We cannot say for sure that the firm was negligent or not, however, most probably assume with the scale of the alleged fraud that someone had to have noticed or found something. One thing people forget, and CAs too apparently, is that an audit is a HIGH level of assurance - not ABSOLUTE assurance as this is impossible due to inherent limitations.
Some have said - what is the point of auditors if something like this can happen. Well, using an extreme analogy - there are often many cases of a mis-diagnosis of cancer - should people some getting tests done? Well, of course not. We accept that there is no 100% certainty, but the process in place is much better than the alternative.