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To: hugh thorne who wrote (5484)	1/31/2002 8:30:06 PM
From: Yorikke	Read Replies (2) of 33421

hugh, the statement: " It will be considerably more expensive to audit under the presumption that fraud may exist. Further, regardless of the audit procedures, if a managment group are intent on fraudulently executing their stewardship function, i doubt any procedures will be successfull." is one of those seemingly intelligent comments that borders on hilarious when looked at in greater detail. The point of an Audit is to determine the likelihood of honesty. Though you are correct that it would be very expensive to audit with the assumption of wrong doing, it is also a rule that Auditors are supposed to use statistical sampling to gauge the state of the firm. It has been revealed already that the Enron Auditors were aware of problems resulting from their investigations, and chose not to make an issue of them as they could be interpreted (under the thinnest of measures) as being within the bounds of Generally Accepted Accounting Principles. The facts are likely to reveal that the Audit staff was well aware of the problems. This is not a matter of missing the rare instance, it is a matter of choosing not to report matters that greatly effected the financial standing of the firm. And it seems likely that this attitude has pervaded the profession and become common in Audits. The link between consulting and Auditing being a major cause of the laxity. This was an issue 20 years ago, it was an issue 10 years ago. One only need go through the professional journals to see the occasional brave individual raising the issue. The fact is the accounting/audit profession sold out. If not individually then as a body and certainly with specific companies. . What has always been feared will now come to pass. And the consequences will be as severe as always whispered about. Federal Regulation will be imposed on a body, no longer even judged a profession (Auditors), that has proven it can not regulate itself and is not reliable enough to engage the public trust. And that's not a rant .....its the simple fact. Its what every accounting student over the past 30 years has learned was the eventual likelihood of not doing the Audit correctly.

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