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insider trading

Reading an article on insider trading now made me think of the unfettered access that we as auditors have to financial information before the press release is out. And it's not just us, it's the clients we audit too. Outside of certain companies, most public companies don't exactly have the best control over their financial reporting; so individuals can get access prior to the public release if they wanted. While the audit firms do a great job of stressing independence, can't help but think of the bad apples who are getting away w/ leveraging such information for personal use. Yes, the Firms can audit your stock accounts but you can always give it a friend of yours who invests in stocks. Feel like that environment is way too lax, and I can see it changing once an auditor gets caught in a high-profile case.

Comments

Anonymous said…
You are right. Auditors should know almost everything about the companies they audit to sign the Financia Statements off and shouldn't be able to use that information to make their personal investment decisions, but, having worked in Financial Reporting for several years I know that there are many other groups of interest that could do inside trading way in advance tha auditors (i.e. all thosen with access to the quarterly reporting before the audit team disembarks inthe office)
Thank you for adding new posts, you have many readers that are really glad you're back.
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Anonymous said…
Thanks for the post. I think that anything related to auiditing is really interesting, specially in Europe, where we have had some cases where the auditors have been pointed on some financial scandals, after all, they are responsible of the numbers that companies announce to their stakeholders.
Thanks for this blog, it is really amazing.
Anonymous said…
Hello. I was wondering - how do you check consolidated financial statements of giant groups in US?
I work for one of the Big 4 companies in a small country from Eastern Europe and consolidations that we check usually include 2-3 small companies, so we just make the Consolidated FSs in an excel file, with consolidation adjustments and then compare our figures with those provided by client. Considering the great amount of work even for a group of three companies, I bet you have a different approach in US. I would be grateful if you could share your experience. Thank you!
Allan said…
There has already a very high profile case in the US (http://www.latimes.com/business/la-fi-mo-kpmg-scott-london-sentencing-story.html). There was a greater awareness of the issue (for a little while) but it is quite difficult to police internally. From this case, it does seem the SEC has mechanisms to find gross abuse. Also, in this case, we see a man lose his freedom and his career. Quite sad.
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