Should we blame auditors for meltdown
Banks, financial institutions, mortgage firms are all collapsing. Even the most pessimistic predictor would not have predicted the size and magnitude of meltdown which the world has begin to address now. To put it simply the scale and magnitude of economic meltdown has been beyond the wildest imaginations.
Nobody today is sure of the crisis and can assert with confidence that when it will see the bottom. Governments right from US, Europe to emerging markets like China & India have been trying to pump in lots of liquidity to bail out the financial institutions that have been the symbols of growth affluence and prosperity for their respective nations. But question arises why this has been allowed to happen. Was there something wrong with the learning’s of these famed scholars from Ivy leagues, who were paid millions to shape up these organizations? What happened to Internal Auditing systems? Questions are many and most of them remain unanswered.
Derivatives are the premise on which Lehman has fallen. Even Noble laureates have acknowledged that it is very difficult to evaluate derivatives. Auditors in many of these institutions were more concerned with their fees and renewal of auditing contracts. These private sector audit firms could not have been expected to go against the working and philosophies of these giants. Therefore many disturbing facts and trends were overlooked by auditors.
Today, we continue to live in the same mirage and have not learnt any lessons post Enron and WorldCom disasters. The best way to bring in accountability and transparency in to the system is to involve regulators in to the audit of the firms. This will not only check the auditing abuse and poor corporate governance but would also help in lifting up investor’s confidence which has hit the lowest levels in recent times.
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