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Tuesday, December 14, 2004

Internal Controls Issues Behind Many Auditor Changes

From Compliance Week

Nearly one of 10 companies that has changed auditors so far this year has also reported internal control issues. That's according to an in-depth analysis conducted by Manchaug, Mass.-based, which found that 1,647 companies reported a change in auditors through Dec. 6. And 152, or more than 9 percent of the total, had disclosed internal control issues.

More than half of those 152 companies dismissed their auditors, while in 71 cases—or 47 percent of the cases—the auditor resigned, according to the study.

Disagreements A "Big Deal"

In general, the percentage of resignations to dismissals has ranged between 18 percent and 34 percent over the past four years, suggesting that when there is an internal control issue, the auditor is increasingly likely to resign.

Joe Cyr of stresses that internal controls are flagged when an auditor change notification specifically identifies internal controls in its filings. He stresses that this does not mean that a lack of these controls, whether corrected or not, were the cause of the auditor change. It simply means that they were mentioned.

posted by Brian Moran @ 10:11 AM   0 comments


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