NY Times on the audit process

As a follow on to our earlier post on some of the audit implications from the Sino Forest saga (or perhaps our earlier comments were a hoax from the SEC...!!), our attention was drawn to an article in the NY Times which also used this case to consider various issues impacting the audit process.  The full article can be accessed here.  

Among the Times' comments:

"Investors trying to decide whether to believe the Muddy Waters report, with its detailed assertion that the company's claims are contradicted by Chinese records, would love to know just what Ernst did check.  What records did it inspect?  Which tree plantations did it visit?  Who did the work?  Was it people from Ernst's Toronto office, which signed the report, or people from a Chinese affiliate?  How many auditors did the work, over what period of time?

Ernst's report does not say, which is no surprise.  Virtually every audit opinion in the world says almost the same thing, with no details about the company being audited."

The article continues with more comments as to whether the scope and procedures of the audit should be more transparent - an interesting read.

 

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Comments

[Moorkh Adhiraaj]

Based on my experience with auditors (though with SMEs), it's almost foolish to assume that auditors add any value to the process.

They just don't have the human resources (number and, in some cases, qualified accountants), motivation and time to do the job that statutory auditors were required to do when the "job profile" was first created.

With shareholders unwilling to pay what it needs to have a good auditor do the good job expected of them, we should expect no improvement in the short run.

A probable solution may be that listed companies be made to pay a fixed percentage of sales turnover to the stock exchanges as part of the listing fees and then stock exchanges reimburse the auditors.

The old model of a company paying the auditor hasn't worked and need to be changed.

cheers!