When the management viz accountants are smarter than the company auditors; when the auditor’s unqualified opinion becomes under intense scrutiny and in a bid to defend himself the auditor says that, “I am or i was just a messenger” as was the case with PwC and Uchumi’s Shareholders or admits his liability yet states in mitigation that “our failing is a representative of the whole profession” as was the case of Andersen in Enron saga yet going ahead to shred incriminating evidence ahead of investigation; things are elephant. Theoretically, a company’s auditor is appointed independently by its shareholders to whom they report to but in practice, auditors are chosen by the company’s bosses to whom they too often become beholden. Against that background, is it little wonder that the quality of audits has deteriorated and thus subjected many a company’s shareholders to untold sufferings and losses? So what changes need to be done? Hitherto, auditors have managed to get away with the fiction of self-regulation through debased peer review and toothless oversight bodies that they dominate and therefore a simpler suggestion that besides putting in place punitive measures to prevent accounting firms from offering financial or tax services to their audit clients, a mandatory rotation every three to four years of both audit partners and audit firm of an entity so that auditors do not become too fond of their clients. This will in turn lead to a true and effective peer review when one firm comes in to look at a predecessor’s book
Posted on: Fri, 26 Jul 2013 18:03:03 +0000
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