Weak Oversight Plagues Audits of Billions in Personal Property

Six months earlier than Los Angeles-based Shepherd College collapsed out of business in 2017, accounting agency BW CPA Group Inc. gave the college’s funds a clear invoice of well being.

State regulators known as the audit “grossly poor,” saying it missed pink flags for potential fraud and left quite a few errors within the monetary statements uncorrected. The yr earlier than, BW CPA Group failed its second every-three-year peer assessment in a row, state regulators stated.

Till regulators took disciplinary motion in 2019, there was no manner for the general public to know {that a} fellow auditing agency twice took the uncommon step of giving a failing grade to BW CPA. The agency was banned from auditing final yr.

Companies that audit personal entities primarily police one another, typically with no public disclosure. A Wall Road Journal evaluation of the system reveals that auditors give high grades to at least one one other, rarely discover fault with the most important accounting companies and infrequently don’t disclose failures amongst smaller auditors.

Of the companies that disclosed their outcomes, 91% received the very best “cross” grade and solely 4% the worst “fail” rating on the three-grade scale, the evaluation discovered. Not one of the greatest 100 companies failed, and 99% of them received the highest “cross” rating, in line with the evaluation.

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