Dont u think Auditors should be replaced every year in a business to have fair reporting naturally?

This is one of the prime criteria of corporate governance and unmeshes the tacit link that gets created by longer appointment and assures independence and allows decartelisation of business entity from auditors.

If we study of the profile of auditor-company management in India one may be able to prove a strong nexusDont u think Auditors should be replaced every year in a business to have fair reporting naturally?
Sarbanes-Oxley was a hastily enacted law in response in Enron and several other corrupt corporations. Congress' goal was to assure the public that they were on top of things by enacting a law that would provide more transparency and integrity in reporting financial results. You are making the assumption that longevity in a job necessarily leads to corruption and that if companies simply swapped auditors every so often all problems would by cured. By your reasoning the company ought to get a new outside CEO each year.



The fault with your reasoning is that you ignore both reality (very few publicly held corporations are cooking the books) and the law of unintended consequences: Sarbanes puts such onerous responsibilities on outside directors, for example, that few want to serve. With your scenario these outside directors must now stake their freedom, fortunes and honor on a bunch of greenhorn auditors who know nothing about the company they are auditing.



Stock prices go down when companies become corrupt. They also drop when earnings drop. S/O is hugely expensive to implement and causes top management to play too much defense. Because this impacts earnings S/O may well cause the loss of more wealth than it presumably will protect.



Your idea is a recipe for disaster. Life involves risk. If one can't stand the heat they should get out of the kitchen. You can always keep your money safe in T-Bills.Dont u think Auditors should be replaced every year in a business to have fair reporting naturally?
Dont u think Auditors should be replaced every year in a business to have fair reporting naturally?

This is one of the prime criteria of corporate governance and unmeshes the tacit link that gets created by longer appointment and assures independence and allows decartelisation of business entity from auditors.

If we study of the profile of auditor-company management in India one may be able to prove a strong nexus



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Flyboy

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Sarbanes-Oxley was a hastily enacted law in response in Enron and several other corrupt corporations. Congress' goal was to assure the public that they were on top of things by enacting a law that would provide more transparency and integrity in reporting financial results. 1.You are making the assumption that longevity in a job necessarily leads to corruption and that if companies simply swapped auditors every so often all problems would by cured. 2.By your reasoning the company ought to get a new outside CEO each year.



The fault with your reasoning is that you ignore both reality (very few publicly held corporations are cooking the books) 3.and the law of unintended consequences: Sarbanes puts such onerous responsibilities on outside directors, for example, that few want to serve. With your scenario these outside directors must now stake their freedom, fortunes and honor on a bunch of greenhorn auditors who know nothing about the company they are auditing.



Stock prices go down4. when companies become corrupt. They also drop when earnings drop. S/O is hugely expensive to implement and causes top management to play too much defense. Because this impacts earnings S/O may well cause the loss of more wealth than it presumably will protect.



5.Your idea is a recipe for disaster. Life involves risk. If one can't stand the heat they should get out of the kitchen. You can always keep your money safe in T-Bills.



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My view countering the reply:

1.The reply presumes i am an investor/speculator.

2.Longevity leads to corruption.More than corruption the point raised has tendency to messup due to comfort of office and coercive nexus the management may indulge with the auditor.Also an auditor is not an employee he is in a position often questioning the management.Can a questioner have independence in the longrun without being much influenced by the management often baptised.

3.CEO often have a performance based term which is quite shorter and is comparable to a position of CFO i dont think we are comparing the roles of auditor to that of a CEO(owner-manager role)

4.Sarbanes did intend to grant more responsibilities but never intended to estopp authority on independent directors.The vision was to make independent appoitments to peep into the corporate veil and on behalf of the stakeholder in comparison to shareholders.

Auditors to act onbehalf of shareholders but in the course of appoitment they may tend to act on behalf of management distracting truth.



5.Stock prices go down4. when companies become corrupt.

This is something incomprehensible economic activity leading to concentration of wealth is necessarily corrupt (not just communist thought).

Corrollary:Clean companies often do not grow.