Don't Trust Your Auditor
· "Probably the first item to check is the auditor's opinion to see whether or not it is a clean one-'in conformity with generally accepted accounting principles consistently applied'-or is qualified in regard to differences between the auditor and company management in the accounting treatment of some major item, or in the outcome of important litigation."
· In fact, there are four categories of opinions that might be awarded, in order of occurrence: (1) "clean," which is unqualified acceptance and is usually presented in two short paragraphs; (2) "subject to" in which the auditor accepts the financials subject to pervasive uncertainty that cannot be adequately measured such as relating to the value of inventories, reserves for losses,or other matters subject to judgment; (3) "except for" meaning that the auditor was unable to audit certain areas of the company's operations because of restrictions imposed by management or other conditions beyond his control. (It should be noted that the SEC generally will not permit publicly owned companies to get away with an "except for" opinion); and (4) a statement from the auditor disclaiming any opinion regarding the company's financial condition which is in effect a disclaimer of ~ p i n i o n
· "Many of our clients are treating the audit as a commodity, like shopping for cheaper gasoline,"
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