|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Auditors Say Fraud Can Be Hard To Detect Accounts Scrutiny
Staff Writer – Financial Times
Securities Mosaic. October 21, 2005
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EXCERPT: Two of the world's most powerful accountants have said there are limits to auditors' ability to detect fraud, as the profession's credibility comes under threat once more from alleged wrong-doing at Refco. Samuel DiPiazza, chief executive of PwC, and William Parrett, chief executive of Deloitte, told the FT there was a gap between public expectations of auditing and reality. The rigour of auditing has been thrown into the spotlight after Refco, the brokerage group, filed for bankruptcy amid allegations of fraud that went undetected ahead of its initial public offering. Refco was audited by Grant Thornton, a medium-sized firm. The heads of PwC and Deloitte, two of the big four accountancy firms, declined to comment specifically on the Refco case. But Mr DiPiazza said: "All the regulations and standards in the world are not going to make us safe from bad behaviour . . . If there is a fraud, and it is collusive and third parties are engaged, it is very hard (to detect)." Large accountancy firms saw their reputations shattered by corporate scandals that began with Enron. Auditors were blamed to varying extents for failing to spot fraud and accounting errors, and Andersen - one of the erstwhile big five firms - was destroyed by its role at Enron. Accountancy firms have come under pressure from regulators to improve the rigour, objectivity and independence of auditing in the past four years, but new scandals continue to emerge. Mr Parrett pointed out that auditors did not check every single transaction at their clients. "Where there is collusive fraud among some leaders of a company, it is particularly difficult to find it on the day it happens," he said, though expressing confidence that frauds would be found eventually. |
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