Canaries Gone AWOL: How Auditors Should Be Helping

During an out-of-court restructuring or a Chapter 11 bankruptcy[1] process, restructuring professionals do not uncommonly hear the statement (or think to themselves): “If only we could have gotten involved sooner.” Oftentimes, business managers that ignore warning signs of distress, apply short-term fixes, or delay restructurings only “dig a deeper hole,” destroying value for stakeholders and…

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Nine Steps to Optimization of the Audit Committee

The audit committee, and its membership, are keys to the success of business operations. If the audit committee fails in executing its duties, there could be grave consequences for the entity, particularly in the areas of financial reporting and controls over the integrity of the financial reporting process. Without proper governance, monitoring and risk assessment…

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Failures Begin With Planning Deficiencies

The author – a former auditor and longtime litigation consultant – has found that, like Tolstoy’s happy families, virtually all inadequately performed audits are alike. In the audit failure arena, they almost inevitably exhibit fatal flaws in their planning processes. Litigators seeking to establish accountant liability in malpractice cases – as well as those charged…

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Understanding How Auditors May Be Exposed to Accountants’ Negligence and Malpractice Suits by Failing to Properly Assess An Entity’s Internal Controls

Gaining an understanding of an entity’s system of internal control is a critical component of conducting an audit. The American Institute of Certified Public Accountants mandates in the body of professional guidance known as Generally Accepted Auditing Standards (“GAAS”) — specifically, within Field Work Standard No. 2, that auditors perform this fundamental exercise at the…

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Five Things Financial Statement Users and Litigators Should Know

Executive Summary Fraud in company financial statements is a problem that affects users in most countries today, and some believe that this problem is only getting worse. While independent auditors render opinions that give investors confidence in the accuracy of a company’s reported financial performance, when fraud is uncovered, resulting litigation often focuses on the…

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