Auditing the auditors

SINGAPORE (June 10): Audit firms have been in the crosshairs of investors and regulators in recent years, and little wonder.

There has been a spate of corporate scandals over the last couple of years, for reasons ranging from poor financial management and excessive valuations of assets, to outright theft and fraud. Each of the scandals emerged despite their financial statements having being given the all-clear by auditors for years. They have left scores of retail investors out of pocket and many wondering about the effectiveness and reliability of auditors.

There is apparently a disconnect between what auditors do and what people expect them to do. In a survey by the Association of Chartered Certified Accountants, more than half of the respondents believes that auditors are responsible for avoiding company failures.