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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Mani1 who wrote (142916)	2/25/2002 8:38:14 AM
From: i-node	Respond to of 1577029

On the other hand, there will be some conflict of interest as long as companies hire their own auditors. This is the fundamental problem. It is the nature of business to persistently attempt to push the limits of financial accounting. As a CPA, I've experienced (obviously, on a much smaller scale<g>) the pressure of business owners needing to look good for the bank. You're compiling their financial statements, THEY, the clients, are going to be paying you, and and the financials look like hell. The bank is NEVER going to lend on them. You must be unbending, because the temptation to cave like a one-egg pudding is definitely there. Under pressure to deliver an unqualified opinion, the CPAs overlooked the most basic responsibility of the auditor: "Do these financial statements present fairly the results of operations and financial position of Enron on a consistent basis?" Forget GAAP, forget FASB. This is Auditing 101. You have to be able to answer that question affirmatively or render an unqualified opinion. This problem is not helped one iota by eliminating consulting, which is the congressional whitewash we're going to see. The audit manager at AA would have been no more likely to qualify their opinion had there only been the $50M/year in AUDIT fees at stake. The solution is to eliminate the built-in conflict of interest: The auditor is hired by and can be fired by the client corporation. If you want to solve this problem for the future, you deal with this issue. A pool should be established into which all corporations pay their audit fees. The pool decides who gets audited by whom, receives and pays for the financial statement audits of every publicly traded company. It is more government bureaucracy, which I hate, but it is really the only solution.