The fall of the Big Accounting Firms

April 14, 2010 - PRLog -- A recent survey suggests some investors would like auditors to identify their clients' key risks as well as highlight areas that could possibly have questionable estimates made by management (2008 Center for Audit Quality Institute survey).

"Investors want to know where the high risks are," said Mary Hartman Morris, a California Public Employees' Retirement System investment officer.

Unfortunately, the disclosure of financial problems at public companies tends to come after the fact.  Auditors don’t examine every transaction and event, so there is no guarantee that all material misstatements, whether caused by error or fraud, will be detected.

The audit report — which is the sole communication between auditors and investors on a particular company — explain the auditors' role and their limitations in finding fraud, "If the discovery of material errors and fraud is not a major part of what the audit is about, it is not clear what value-added service the auditor offers the investor and capital markets," (Andrew Bailey, University of Illinois accountancy professor emeritus).

So if the big accounting firms refuse to find fraud and material misstatements, then who will.

A group of finance and accounting professionals offer an innovative new solution to identify key risks as well as highlight areas that could possibly have questionable estimates made by management. Their online forum, http://www.zethics.com, provides employees a structured process to anonymously disclose information about fraud and material misstatements.

Investors need assurance that the companies within their portfolio will not be the next highly publicized failure. To give them that assurance, investors must have the ability to identify the potential causes of such failures.

Disclosing fraud and material misstatements online is an internal audit best practice and assures investors that the companies within their portfolio will not be the next highly publicized failure.

To investors, information is knowledge, and knowledge is power.  Improved internal transparency from an independent third party arms investors with comprehensive information about the quality of the business and strength of the management team.  This information serves as a check and balance against the information provided by management as well as auditors and outside consultants.

The online forum aims to demonstrate that transparency can work.  When information is relevant, standardized and public, it fosters intelligent decision-making.

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zEthics is the FIRST of its kind; we broker trust in U.S. publicly traded companies. The value of our business is information. Through an online information service, zEthics provides customers distinct advantages. Investment professionals gain confidence and trust in public companies. Officers and Directors of public companies avoid being blind-sided by fraud and misconduct. Public companies gain investor and public acceptance of their ethics and corporate governance programs, and gain extended visibility inside customers, suppliers and competitors to mitigate business risk as well as identify and qualify new business opportunities. Federal and State Regulatory Agencies can determine where delusion ends and dishonesty begins. For more information, visit http://www.zethics.com.