|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
A Report By The World's Largest Auditors Urges Relaxed Standards For Liability
Staff Writer – New York Times
Securities Mosaic. November 8, 2006
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EXCERPT: The heads of the six largest auditing firms in the world issued a call for relaxed liability standards for their companies yesterday, in what appears to be the start of a campaign to protect their franchises while reducing the risk that bad audits could bankrupt one or more of them. In a report, the executives said that they supported efforts to standardize accounting and auditing standards around the world and that eventually, ''a new business reporting model'' should be developed that would provide better financial information more rapidly. But while the report, entitled ''Serving Global Capital Markets and the Global Economy,'' offered little detail in that area, it was most detailed in its warnings that auditor liability needed to be restricted and in mounting the arguments for that outcome. It did not offer specific proposals on how liability could be restricted while continuing to protect investors if auditors failed to do a conscientious job. Instead, it pointed to a restriction on auditor liability as being essential to solve many problems of the industry, and suggested that if investors were worried about fraud, they should be willing to pay for more detailed and more expensive audits than those prepared now. ''Our firms are not and can never be the insurers of last resort for the capital markets,'' the report said. It cited an ''expectations gap'' between what investors wanted from an audit in detecting fraud ''and what audit networks are actually capable of doing, at the prices that companies or investors are willing to pay for audits.'' One idea the report raised, which could bring in more revenue with less risk for auditing firms, was to create a separate category of forensic audits, which would cost more than ordinary ones and be more likely to uncover fraud. It said companies might be required to have such an audit every five years, or to face such audits on a random basis. Or, it said, investors could choose whether they wanted their companies to face that additional cost. |
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