Impossibility of Auditor Independence
The Impossibility of Auditor Independence
Intentional collusion of auditors and their clients is is not the major cause of Audit integrity. Most of the times, auditors find it difficult to become objective. In 1992, Phar-Mor, Inc. drugstore in the United States seeking a court protection from corruption failed a court case.
The previous auditors, Coopers & Lybrand, Phar-Mor's failed to state inventory inflation and manipulation of finanicial that lead to overstating of $985 million earnings in a period of three years. The judges found Coopers & Lybrand answerable for fraud to the joint investors.
The attorney for one investor argued that "this sends a strong signal to the accounting community that investors take very seriously the role of audited financial statements and rely on them for their integrity."'
The investors who successfully sued Coopers & Lybrand contended that Gregory Finerty, the Coopers & Lybrand partner in charge of the Phar-Mor audit, was "hungry for business because he had been passed over for additional profit-sharing in 1988 for failing to sell enough of the firm's services."'
Analysist, argue that Independence of audit was hindered by relationship with the management. Unjustified certification of financial statement like The Phar-Mor case are of many cases where auditors have been held responsible. Investors in the MiniScribe Corporation maintained that auditors were at least partially responsible for the now-defunct company's falsified financial statements; at least one jury agreed, holding the auditors liable to investors for $200 million.
In the U.S. financial reporting of savings and loan crisis has led to lose of millions of dollars by audit firms settling lawsuits and out-court suits making them collapse.
The accounting profession claim that plaintiffs unjust actions are aimed looking for a convenient "deep pocket" towards recovery of their unplanned business decisions.
The accounting profession’s
Intentional collusion of auditors and their clients is is not the major cause of Audit integrity. Most of the times, auditors find it difficult to become objective. In 1992, Phar-Mor, Inc. drugstore in the United States seeking a court protection from corruption failed a court case.
The previous auditors, Coopers & Lybrand, Phar-Mor's failed to state inventory inflation and manipulation of finanicial that lead to overstating of $985 million earnings in a period of three years. The judges found Coopers & Lybrand answerable for fraud to the joint investors.
The attorney for one investor argued that "this sends a strong signal to the accounting community that investors take very seriously the role of audited financial statements and rely on them for their integrity."'
The investors who successfully sued Coopers & Lybrand contended that Gregory Finerty, the Coopers & Lybrand partner in charge of the Phar-Mor audit, was "hungry for business because he had been passed over for additional profit-sharing in 1988 for failing to sell enough of the firm's services."'
Analysist, argue that Independence of audit was hindered by relationship with the management. Unjustified certification of financial statement like The Phar-Mor case are of many cases where auditors have been held responsible. Investors in the MiniScribe Corporation maintained that auditors were at least partially responsible for the now-defunct company's falsified financial statements; at least one jury agreed, holding the auditors liable to investors for $200 million.
In the U.S. financial reporting of savings and loan crisis has led to lose of millions of dollars by audit firms settling lawsuits and out-court suits making them collapse.
The accounting profession claim that plaintiffs unjust actions are aimed looking for a convenient "deep pocket" towards recovery of their unplanned business decisions.
The accounting profession’s