Audit scandals
Huge international auditing companies have a long history of covering
up accounting errors, lies and out and out fraud for many a year now.
The huge firms have been fined millions of dollars and pounds in
Canada, the United States and in the United Kingdom on a regular basis
and they keep on trucking. Only when the stench is too bad to be
forgiven do the companies go out of business. Arthur Anderson is the
best known example.
Arthur Andersen LLP, based in Chicago, is a holding company and
formerly one of the "Big Five" accounting firms among
PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and
KPMG, providing auditing, tax, and consulting services to large
corporations.
In 2002, the firm voluntarily surrendered its licenses to practice as
Certified Public Accountants in the United States after being found
guilty of criminal charges relating to the firm's handling of the
auditing of Enron, an energy corporation which had filed for bankruptcy
in 2001.
The verdict was subsequently overturned by the Supreme Court of the
United States. The damage to its reputation, however, has prevented it
from returning as a viable business, though it still nominally exists.
You can read a long list of auditing scandals in the appendix
at the end of this website. (I stopped adding news reports on large
scale auditing scandals as there seemed to be no end to them.)
What about small fish?
If the big fish are so cavalier about their reputations, is it
reasonable to expect higher standards of disclosure from the small mom and
pop shops that audit condo corporations?
I was a participant at an AGM for a Toronto condo in early 2016 where
the auditor presenting the condo corporation's financial statements was
under suspension. A little embarrassing. Of course, when the owners
were informed, he was not re-appointed.
I later heard that a few weeks later, he was at another AGM where he
presented another auditor's report; another one that he signed. Once
again his suspension was raised at the AGM and once again he was not
re-appointed by the owners.
I hope this is an extremely rare occurrence.
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