|Published : 15 Apr 2017, 13:42:43|
Tempering with the auditors’ jobs
FE Online Desk
Tampering with a random sampling process strikes at the heart of how auditors do their jobs. It is physically impossible for an accounting firm to examine and verify everything a big company does in time to provide investors with meaningful quarterly results, according to a global media report.
The auditors have to select a relatively small group of transactions, investigate them thoroughly, and hope that they are representative of the larger company.
The process can easily break down, as it did in the 2003 Royal Ahold accounting scandal, where employees at its US Foodservice subsidiary conspired with suppliers to lie to the auditors about whether specific transactions took place as described.
That reality makes it all the more staggering that five KPMG partners failed to act on the danger posed by their secret tipster. Even school children know that it is cheating to get an advance copy of the test.