Alan Rappeport, CFO.com | US
November 14, 2007

fooling the auditor

They always could fool the auditors. Anyone that thinks anything else is a fool themself. It always comes down to the integrity of management and knowing your client. The firms preach it but, in their greed, don't practice it.

Of course, that's just my opinion and I could accidently be correct....

Posted by Thomas Tone | Nov 29, 2007 11:53 AM ET

Who is the real fool?

The real fool is the one that believes that the Center for Audit Quality is an objective commenter on the state of the audit industry or on the true attitudes of the audit firms' clients. And remeber where most Fortune 500 CFOs get their training - the Big 4 audit firms.

I pity the fool who thinks tougher auditing is what brought about the quick writedowns for the subprime crisis. Impotent auditing is what made them so significant, severe and sudden. The lack of strong leadership from the firms to their clients during the go-go days on issues such as valuations and adequate loan loss reserves means the banks can play the losses as a result of a "sudden" economic downturn instead of lack of sufficient risk management, something the auditors are responsible for making sure their clients are doing well.

See my alternative view at http://ReTheAuditors.blogspot.com

Posted by Francine McKenna | Nov 15, 2007 7:09 PM ET

What level of fraud is fraud

It is time to define the act of fraud in financial terms that we auditors should be responsible for. According to current standards we are trying to determine reliability of the published financial statements. My short definition is: Are the financial statements statistically valid? This translate that I need to test for the level of error (fraud) that would render the published statement statistically invalid. If you read the SAS effective this year, it states the auditor is responsible for accessing risk of material error and it should read the publisher of the financial statement is responsible for accessing risk and makeing comments to that affect. I feel that a survey will show that most small firms have yet to implement the current SAS on risk into their audit programs because the client will not bear the cost. The requirement still is "audit until I am happy". The real world is the small companies (and their auditors) are not supporting this type cost and work and therefore will take the risk of not meeting the standard. Until we have standards written for size of companies and thier impact on the market we will have this problem. Auditors are not hopeless, fraud detection is not properly defined in the standards.

Posted by Milton Bulloch | Nov 14, 2007 5:25 PM ET