Comments on: Audit Integrity Says, “I Dare You…” – Who Audits The 300 Worst Companies?

By: fm

fm — Fri, 18 Sep 2009 19:51:33 +0000

@dans

By market cap, not absolute number.
Francine

By: dans

dans — Fri, 18 Sep 2009 19:49:00 +0000

not to nitpick, but how can 300 companies represent the bottom 10% of 8000+ companies? wouldn’t that have to be 800+

By: re: The Auditors » Blog Archive » McKenna Interviewed By @MissTrade’s Matt Davio

Sat, 29 Aug 2009 21:30:15 +0000

[...] I need to come up with a weekly recommended “short this loser” list… Easy AdSense by [...]

By: re: The Auditors » Blog Archive » The “Last Out” May Come From Left Field…

Mon, 13 Jul 2009 20:11:45 +0000

[...] Audit Analytics says that more “going concern” opinions were filed in 2007 and that the pace was set to exceed that in 2008 than in the last ten years. Worried a bit? Some might say the auditors are catching up. And I would agree. The problem is most of the big financial services firms that failed or have been bailed out have been teetering for a while and the ones that are still going are still a big problem. [...]

By: re: The Auditors » Blog Archive » Auditors Not Trying To Wiggle Off The Hook. Really.

Mon, 27 Apr 2009 02:36:19 +0000

[...] there are, for sure, more to come as a result of the financial [...]

By: re: The Auditors » Blog Archive » Looking Out For Me, Myself, And I

re: The Auditors » Blog Archive » Looking Out For Me, Myself, And I — Sun, 15 Mar 2009 23:42:39 +0000

[...] been a whirlwind weekend, after a very busy week. I have been posting comments almost constantly. It seems that KPMG, and now Deloitte again, [...]

By: Bad boys, old boys, new thinking | AccMan

Bad boys, old boys, new thinking | AccMan — Sun, 15 Mar 2009 23:02:29 +0000

[...] the audit front, Francine McKenna delivers a stinging indictment to the Big Four in their complicity to continuing with ‘clean sheets’ for some of the [...]

By: Integrity Research» Blog Archive » Audit Integrity Challenges Corporations with Aggressive Auditing

Fri, 13 Mar 2009 17:12:25 +0000

[...] re: The Auditors, a news site covering audit and accounting issues. An excerpt follow, but you can read the whole interview here: e: The Auditors: Where do you see the auditors’ role in this process given their PR claim, after [...]

By: admin

admin — Thu, 12 Mar 2009 14:46:24 +0000

@Chicago Accountant. You point is made. I don’t think the intention was to say that all the companies on the list posed potential systemic risk if they failed. In fact, that’s why I focused on the 100 largest by market cap and as a subset of that, the biggest names and the financial services and the Big 3 automakers that have been said to be worth taxpayer bailout and subsidization in the billions of dollars.
fm

By: Chicago Accountant

Chicago Accountant — Thu, 12 Mar 2009 14:22:51 +0000

@admin,

I’m surprised that you don’t see my point. Let’s not forget what this is about. Audit Integrity posited that because these companies use aggressive accounting, they create systemic risk per se. That statement is false. The statement should instead say because these companies use aggressive accounting, they may create systemic risk. Let’s look at a few companies on the list:

CSS Industries, Inc. Market cap of 100 M
Internet Brands, Inc. Market cap of 231.46M
On2 Technologies, Inc. Market cap of 34.38M

The failure of these companies would not lead to a catastrophic market failure. However, according to the folks at Audit Integrity, because they made the list, they do pose systemic risk! Nonsense. I proved my point. The per se statement is false. You need to be super-big and be on the list to pose a higher systemic risk.

Yes, if we had a perfect storm and many of these companies failed because of aggressive accounting issues, then we would have a problem. Or, even if a handful of the large corporations failed on your list, we would also see systemic risk. However, you are talking about seemingly uncorrelated events occurring at the same time. I am willing to concede that in this market, events that we would have previously assumed to be uncorrelated could in fact be correlated. However, if we are talking about a failure of a single company, only the biggest of the big corporations will create systemic risk.

Does that make sense?