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Accounting Firm Accountability

With the recent prevalence of corporate scandals in the United States recently, there have been many efforts made towards reform.

I need help evaluating the following statement:
"Accounting firms should be liable to pay stockholders if they give a company a clean audit and it goes bankrupt within a year."

Solution Preview

This statement is very assumptive and puts very impeding obligations upon the accounting firms. There are many problems with this.

First, a clean audit is not that correlative to a limited chance of bankruptcy. Likewise, companies who do not get clean audits or should not get clean audits most of the time are probably more likely not to go bankrupt (unless someone finds out about what they are doing) because they doctor their financial statements.

Thus, many different factors impact a business that has nothing to do with accounting auditing. ...

Solution Summary

This solution discusses whether accounting firms should be held liable for paying stockholders if a company goes bankrupt within a year after a clean audit. It discusses what a clean audit does and doesn't mean for a company, and various factors that impact a business in 374 words.

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