On The Grumpy Old Accountants readers can regularly read about the quality of auditing an accounting, an important if not the most important issue for all investors.
The latest post that i found particularly interesting is about Sam E. Antar, cousin of Crazy Eddie, and the effectiveness of "ethic lessons" for auditors and students.
He argues that the capital markets attracts the 10% "of the public is absolutely unethical and incapable of behavioral change". He is skeptical that auditors with the regular middle-class background will be able to detect the true intentions of such highly educated and ruthless scammers as Sam Antar.
I agree with his conclusions and find this a really interesting argument besides the usual stuff, such as conflict of interest, etc.
I also definitely recommend you to read the articles about Groupon and their accounting.
In my opinion investors can learn a lot by trying to stay up to date with accounting regulations and their consequences. I might be biased since I study a lot of accounting myself however sounds knowledge is necessary in order to evaluate the most important documents (financial statements). This holds especially true in times of ever increasing importance of goodwill, deferred taxes and fair value accounting combined with the management approach favored by standard setters.
The way a company reports their numbers makes a huge difference in what they actually mean (whether by investors perception or reality). Following standardized accounting is so important for investors and for businesses to really know what is going on that I am not happy to see so many companies and individuals being unethical in their accounting.
ReplyDelete