U.S. investors urge "going concern" warning reform

Wed Mar 28, 2012 7:31pm EDT
 
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By Dena Aubin

(Reuters) - Regulators need to crack down on auditors who fail to warn investors and the public before corporations fail, investors told the main watchdog for U.S. auditors on Wednesday.

Most big companies bailed out by the government in the 2007-2009 financial crisis had clean bills of health from their auditors and no auditors have been disciplined over this, investors told the Public Company Accounting Oversight Board at a meeting in Washington.

If auditors "continue on the track they're on, two decades from now, they'll no longer be relevant at all," said Lynn Turner, former chief accountant for the U.S. Securities and Exchange Commission and a member of a PCAOB advisory group.

Recently it was analysts, not auditors, who disclosed problems at companies such as Olympus Corp, Diamond Foods Inc and troubled China-based companies, Turner said.

His remarks came at a meeting of a PCAOB investor advisory group that is looking at ways ensure investors get earlier warnings before companies collapse.

Audit standards require auditors to warn investors when a company appears to be at risk of no longer being a "going concern." But auditors are reluctant to issue such warnings, which can be a company's death knell, causing credit to dry up.

Audit fees, ranging in the tens of millions of dollars for large companies, are also at stake in such situations.

FEW WARNINGS ON LARGE COMPANIES   Continued...

 
New York Superintendent of Insurance Department Eric Dinallo (L) and former chief accountant at the Security and Exchange Commission Lynn Turner (R) swear-in at the U.S. House Oversight and Government Reform Committee hearing on the cause and effects of the AIG bailout on Capitol Hill, October 7, 2008. REUTERS/Larry Downing