more on sox, auditing, finding improprieties

[David Farber <dave () farber net>]

Begin forwarded message:

From: Anne & Lynn Wheeler <lynn () garlic com>
Date: January 12, 2006 10:22:04 AM EST
To: dave () farber net
Cc: ip () v2 listbox com
Subject: Re: sox, auditing, finding improprieties

ip () v2 listbox com wrote:
> From: Daniel Berninger <dan () tier1research com>
> Date: December 22, 2005 9:01:51 AM EST
> To: dave () farber net
> Subject: Jack Bogle seeks to spark "The Battle for the Soul of   
> Capitalism"
> Dave,
> I wrote a review of the new book by Vanguard founder Jack Bogle's for
> clients that may be of interest to readers of IP.
> "The Battle for the Soul of Capitalism" argues most of the forces that
> produced the scandals among Enron, Worldcom, et al remain in place.
> This means investors should expect another wave of scandals even  
> as  the bad actors of the first wave go to trial.
> Bogle believes the cycle will continue until investors get much  
> more  active in holding CEO's and the financial intermediaries  
> accountable.

in principle, auditors are looking for inconsistencies between  
different information sources (which might be indication of fraud or  
other improprieties). auditing internal corporate books somewhat  
assumes that there are at least some that represent independent  
sources and therefor might have inconsistencies. modern IT technology  
can be leveraged to generate a complete consistent set of corporate  
books. in face of being able to leverage IT technology to generate  
complete consistency isn't going to be overcome by asking for more  
information from the same source (more doesn't necessarily imply  
independent)

looking for inconsistencies between independent sources then would  
imply that sources of information from non-corporate sources would  
have to be checked against corporate books (as opposed to assuming  
that inconsistencies might exist in purely internal corporate books,  
no matter how much the volume of information is specified).

that also somewhat has led to leveraging other sources of information  
about possible fraud or improprieties ... like inside informers.


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