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.

top   contents   chapter   previous  next