Chapter 5. Accountants and Auditors

Accountants and auditors are an important part of the monitoring system. We rely on them to provide us with an accurate picture of a firm's business activities. However, to be effective monitors, they have to be credible. Unfortunately, public opinion of the accounting profession is at an all-time low. It's no wonder that Arthur Andersen's shredding important Enron documents was front-page news. Its eventual conviction on obstructing justice charges brings the “Big 5” accounting firms down to only four. Since then, news of one accounting scandal after another has dominated the media.

In response, the government has proposed many solutions for bringing ethics to the profession and trust back to investors. The ...

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