After writing 7 blogs and reading the other blogs, I notice already that the big 4 are not as objective as they should be, moreover they have been carelessness in some cases. In my last blog, I would like to highlight that audited cases are not always trustable.
Due to the financial crisis, the High Court dealt with 13 negligence cases last year. This is a record, in comparison with the previous 5 year, there were only 4 cases. The main raison is that shareholder lost their invested money when companies collapsed. I definitely understand that investors are targeting the wrongdoer and in most cases the accountant can be blamed for not warning investors for possible problems.
But this is nothing compared with the 61 claims for audit firms, which participate in corrupt scandals as Enron and WorldCom. Lawyers think that this is just the beginning: the crisis could provoke a storm of scandals. Investors had always had faith in audit firms, the big 4 gives hope in a certain way. If they give the books of a company approval, investors can use the fact that everything happened above board. But nowadays, I completely understand that the confidence in audit firms is gone because they are not always copper-bottomed.
They are plenty of examples of corrupted cases: Equitable life audited by E&Y sued for £700 million in 2005, KPMG sued for $1 billion by New Century, doubts about the impartiality of PwC in the case of Satyam, the role of E&Y by the collapsed Lehman Brothers, … These are a few examples, but as you notice we cannot ignore these problems. An ostrich politics will only worsen the problem.
I definitely think that there must be supreme control on the audit firms, a kind of an upper hand. It is their job to control objectively the companies so investors can know if they should invest. If we can’t have trust in them any longer, how can we possible know whether a company is worth to invest in or not? In my view it is drastic times call for drastic measures.
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I agree with the opinion of Laurens. Measures have to be taken and this as soon as possible. When we can’t trust auditors any longer, who else should we trust for doing audits? Will audits become less important? I do think that audits are essential.
BeantwoordenVerwijderenLike Laurens en Lynn say, the audit firms must be audited as well. Because, if the Big Four isn't objective, and they are corrupt, the other companies will commit fraud more and more because they think it's all tolerated. In fact, the Big Four gives the wrong model and this must be punished severely.
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