In spite of the fact that public-accounting firms rely on
their respective audit clients’ decisions to be retained to perform the next
year’s audit, society deems an unqualified audit-opinion to be independent. The
assumption is that the audit firms can police themselves, keeping their
financial pressures from influencing the audit opinions. The ongoing temptation
is of course to produce a clean opinion so as to be retained as the client’s
public accountants. Unfortunately, someone at a given CPA firm must have authority
requiring attention both to audit opinions and the firm’s own financial
performance; internal policies separating pressure from the latter from
reaching the former can thus be easily overcome from the vantage point of that
authority. This vulnerability was on display in 2015 in the “dot-com” industry
in BuzzFeed.
The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.
