Jul 06, 2017 Others

Why do you Think Rules Exist that Restrict Auditors from Investing in Companies that are Audited by Their Firms?

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Why do you Think Rules Exist that Restrict Auditors from Investing in Companies that are Audited by Their Firms?

Instructions:

Rules governing the investment practices of individual certified public accountants prohibit them from investing in the stock of a company that their own firm audits. The Securities and Exchange Commission (SEC) became concerned that some accountants were violating this rule. In response to an SEC investigation, PricewaterhouseCoopers fired 10 people and spent $25 million educating employees about the investment rules and installing an investment tracking system.
Why do you think rules exist that restrict auditors from investing in companies that are audited by their firms?
Some accountants argue that they should be allowed to invest in a company’s stock as long as they themselves aren’t involved in working on the company’s audit or consulting. What do you think of this idea?
Today, a very high percentage of publicly traded companies are audited by only four very large public accounting firms. These firms also do a high percentage of the consulting work that is done for publicly traded companies. How does this fact complicate the decision regarding whether CPAs should be allowed to invest in companies audited by their firm?

Content:

Auditors Investment-Related Issues Name: Institutional Affiliation: Date: Auditors Investment-Related Issues Auditor independence is critical to ensure that they do their work in a transparent and honest manner. The rules that inhibit these accountants from investing in any firm that

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