Evaluate the following proposal and debate it?
Answers:
accounting firms process the numbers given to them by the client company.unless there is a gross inconsistency in the books they will not catch it.to hold the accounting firm liable for their clients misdeeds is unfair and biased.investors should practice due diligence and look at more than the financial reports.if the board members are leading extravagant life styles,sales don't match expectations ,etc.the potential investor should trust their gut and walk away.
My debating point to you is this:
You are obviously not an accountant nor do you seem to have the slightest understanding of how a business works and what an audit firm does.
A clean audit tells the investor that a company follows accounting rules as required. It does not tell an investor that the management is running the company competitively.
1.) If the subject company had a large client who suddenly stopped buying from them then the subject company could go out of business while having done nothing wrong.
2.) If a new company entered the industry and out-competed your subject company, your subject company could go out of business very quickly.
3.) If you subject company sells items in a style driven market and the styles change - the company will lose business and could easily go bankrupt (watch what is happening to The Gap).
All these events could occur and and none of the negative consequences would be due to a failure of the Audit Firm.
P.S. - I have never worked for a CPA firm in my life. I have participated in poor management at very honest companies. And at some dishonest ones.
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