In the wake of the financial shenanigans at Anglo Irish i thought id investigate the exact role an external auditor plays in a company.
Question: How much reliance can one put on an auditors report??
Answer: NONE.
According to Robert Leach (FCCA FIPPM AcertCM)
"An auditors report is an opinion on part of another accountant's opinion, and nothing more.
The auditors report PROVIDES NO GUARANTEE THAT THE ACCOUNTS ARE CORRECT, that the business is trading legally or indeed at all, or THAT THERE IS NO MASSIVE FRAUD GOING ON.
The auditors report is really a curiosity. In fact anybody can prepare company accounts.
The directors can appoint the village idiot if they wish, but the auditors must be professionally qualified accountants.
An auditor states that the accounts are correct and fair and they comply with the Companies act and that is all. If the company is involved in crooked dealings and has been ripped off, it will still get a clean audit report, provided those dealings and rip-offs are properly accounted for!
Warren Buffett has always said one should take audit reports with a big pinch of salt.
""He also complained that many other companies were overstating earnings, and he expressed puzzlement that their auditors let them get away with it.""
Moral of story: Dont take the audit report seriously!
Question: How much reliance can one put on an auditors report??
Answer: NONE.
According to Robert Leach (FCCA FIPPM AcertCM)
"An auditors report is an opinion on part of another accountant's opinion, and nothing more.
The auditors report PROVIDES NO GUARANTEE THAT THE ACCOUNTS ARE CORRECT, that the business is trading legally or indeed at all, or THAT THERE IS NO MASSIVE FRAUD GOING ON.
The auditors report is really a curiosity. In fact anybody can prepare company accounts.
The directors can appoint the village idiot if they wish, but the auditors must be professionally qualified accountants.
An auditor states that the accounts are correct and fair and they comply with the Companies act and that is all. If the company is involved in crooked dealings and has been ripped off, it will still get a clean audit report, provided those dealings and rip-offs are properly accounted for!
Warren Buffett has always said one should take audit reports with a big pinch of salt.
""He also complained that many other companies were overstating earnings, and he expressed puzzlement that their auditors let them get away with it.""
Moral of story: Dont take the audit report seriously!