Document Type

Article

Publication Date

10-2003

Publisher

New York State Society of Certified Public Accountants

Source Publication

The CPA Journal

Source ISSN

0732-8435

Abstract

A rash of high-profile bankruptcies has led to a search for answers. Many hold auditors responsible for not detecting the potential for bankruptcy during the most recent audit. The Weiss Report, a study of several dozen bankrupt companies submitted to the U.S. Senate during its deliberations on the Sarbanes-Oxley Act, found a "broad and massive failure" on the part of auditors to raise "yellow flags" that indicate potential bankruptcy. The authors examined Weiss' methodology and found that, applied to a broader group of companies, Weiss' criteria would have incorrectly predicted bankruptcy for nearly half of the non-bankrupt companies studied. This failure to accurately predict undermines the credibility of the subsequently enacted legislation.

Comments

Published version. The CPA Journal, Vol. 73, No. 10 (October 2003): 38-42. Publisher link. Reprinted from The CPA Journal, October, 2003, © 2003, with permission from the New York State Society of Certified Public Accountants.

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