AUDITS EXIST to shore up trust in financial statements. Investors look to professionals to tell them whether companies’ managers are squandering their money. What happens when trust in auditors evaporates? Britain provides an illustration.
The country has seen a spate of high-profile company failures in the past year, most notably that of Carillion, a construction firm with many public-sector contracts. Angry lawmakers want to know why auditors did not raise the alarm. The result has been a number of official reviews. The Competition and Markets Authority (CMA), Britain’s antitrust agency, is assessing ways to improve the audit market. A separate review is looking at the Financial Reporting Council, the audit regulator. Both will publish initial findings by the end of the year. Three more reviews—by MPs, the opposition Labour Party and an accountants’ trade body—are also in the works.
The case against auditors is…
