Chapter 17
How Companies Find Errors: The Auditing Process
IN THIS CHAPTER
Getting acquainted with audits and auditors
Checking out the auditing process
Exploring accounting standards and principles
Most readers of financial reports don't work for the company whose reports they're reading and, therefore, must depend on the truthfulness of the company's management in reporting its financial statements. Can you depend on the numbers you see?
The question is valid, especially considering the corporate scandals that have rocked Wall Street since the collapse of Enron in December 2001. (To find out more about why the world's largest electricity and natural gas trader filed for bankruptcy, see Chapter 23.) The Enron scandal — followed by financial reporting scandals at other major corporations such as MCI WorldCom, Adelphia, AIG, and many others — led investors to be wary about the numbers companies put in their financial reports. In the more recent scandal that broke in 2020, Wells Fargo employees created fake profiles to file fraudulent applications in order to benefit from the Small Business Administration’s relief program during the Covid pandemic.
In this chapter, I explore how ...
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