Saturday, December 25, 2010

Role of Auditors in Crisis Gets Look

Via WSJ.
Lynn Turner, a former Securities and Exchange Commission chief accountant, said auditors did perform better after the Sarbanes-Oxley Act, which took effect in 2002. But around 2006, faced with a slowing economy, they "stepped back from that, reversing course, heading back down the same old road they've been on before the corporate scandals."
In addition, a series of court rulings in recent years have made it tougher to hold auditors accountable when their work is flawed. In 2008, for instance, the U.S. Supreme Court restricted the ability of shareholders defrauded by a company to sue third parties such as the company's accountants.
Others believe auditors have performed well recently. Michael Young, a lawyer at Willkie Farr & Gallagher specializing in cases involving accounting irregularities, said auditors have actually been pretty tough during the crisis in forcing companies to justify their valuation methods, a move which has resulted in many banks having to write down the value of their assets.
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