During the recent failures in the global financial
system one group of participants have remained largely unscathed for their part
in the train wreck, the Auditors.
For example in Japan the former Olympus chairman,
Tsuyoshi Kikukawa, has pleaded guilty to charges of falsifying accounts,
covering up losses of $1.7bn(£1.1bn). Kikukawa and 2 senior executives admitted
to hiding losses dating back to the 1990's.
This begs the question that during
that lengthy period how many Auditors examined the validity of the reported
accounts?
Essentially there are many instances of conflict of
interest such as taking on consultancy work for Clients and becoming too cosy
with management teams.
It is all too easy for companies to bully the young
staffers sent in to do the grunt work.
What chance has a newly appointed auditor walking
around a factory warehouse to adequate value stock? In reality they have to
rely on the company for “valuations” and this can result in a totally
inaccurate picture being presented.
The validity of a company’s accounts reflects the
integrity of the company which is being audited. As was demonstrated with the
banking crisis in Spain an unrealistic valuation of the property portfolio
either through deviousness or sheer incompetence will ultimately have disastrous
consequences.
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