Where were the auditors?

For mortgage crisis that led to a credit squeeze in the global markets, we blamed lax diligence standards adopted by lenders and their bond issues favorably rated by credit rating agencies. But what about auditors, that never found a thing missing?

Fee dependence, weak laws and self-interest inevitably compromise impulses for penetrating audits. The inevitable outcome is worthless audit reports. Carlyle Capital Corporation, a hedge fund with debts of £11bn, has become the latest casualty of the deepening credit crisis - and the effects will ripple throughout the financial world.

It is disappointing to see this even though in the last 7 post-Enron, SOX driven years, shareholders have given them unprecedented power and budgets to be more invasive in their diligence and their ability to challenge managements.” But their motives don’t change much beyond fee squeeze.

Wondering about Bear Stearns? Deloitte certified their annual report on January 28.

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