Should auditors be blamed for the recent spate of major corporate collapses in US and Australia?

Answer 1

First let's clarify the term auditors. Internal auditors are employees of the corporation, and their job is to examine how the corporation maintains its accounting records to ensure that everything is accounted properly and according to rules and laws. They typically report to the audit committee made up of some members of the board of directors.

Outside auditors are Certified Public Accountants, and they are hired by the corporation to examine its financial statements and the underlying records, and to express an opinion about the fairness of those statements and whether or not they comply with accepted accounting principles.

Outside auditors also examine the system of financial controls the business uses to manage its finances. The auditors then report their findings to the board of directors, and they express their opinion as to the fairness of the financial statements prepared by the corporation.

The job of auditors is not to discover fraud, embezzlement, or other infractions of law, all of which can easily be hidden from the auditors if management wants to hide them. If illegal activities are taking place in a business, or if a business is poorly managed, or it suffers events that it cannot prevent, such as loss of a major client, a natural disaster, or an act of terrorism, it may collapse, but the collapse is not caused by auditors doing a poor job. In many cases of corporate collapse, auditors are blamed for not discovering the problems, but often the problems were evident from the auditor's reports and ignored. There are cases of auditors being negligent or doing shoddy work, but the resulting collapse is still the responsibility of management and not the auditor.

Answer 2

No....auditors just count up the money, the collapses are often the result of poor investment or business strategy.

When the auditor or accountant has been involved it has simply to postpone the collapse, rather than actually manufacture it.

Business collapses are part of business life, and often they happen in the high growth high profile areas (if you think what we have is bad, consider the tulip bulb speculators of 17th centure holland, and remember Holland makes a lot of money today from tulips).