The audit liability crisis: they protest too much!
Article Abstract:
The public interest will not be served if the argument put forward by the Big Six audit firms regarding the fairness of the US tort system is accepted to be true. The argument, expressed in a highly critical document issued in Aug 1992, states that without reform in the laws on professional liability, large audit firms would be forced to minimize the amount of audit work they conduct since the financial costs of defending themselves in liability cases were virtually rendering audit work nonviable. Indeed, the report went as far as to suggest that the Big Six might even withdraw from audit work altogether if no changes to the tort system are made. The position adopted by the Big Six is indefensible since it reflects a desire on the part of these giant audit firms to place their economic interests above the public interest which they as auditors have made a commitment to uphold.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1992
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Making cash flow statements useful
Article Abstract:
Making cash flow statements useful requires the re-education of professionals involved with financial reporting. Accountants, managers, auditors and report users have been habituated to data concerning profit, which differs from cash flow data in many aspects. However, these differences cannot be used to predict corporate success or failure due to several reasons, including the inadequate ability of single indicators to predict the health of the reporting entity, the dependence of operating and other cash flows on the nature of business activity, and the unreliability of cash flow data from a single period. The educational task for academic accountants, professional bodies, and sources of accounting standards lies in teaching financial experts to adapt to the unevenness of cash flow accounting.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1992
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