A new academic study funded by the Center for Audit Quality scrutinizes the role of the external auditor in fraudulent financial reporting and found that the top areas cited by the Securities and Exchange Commission were failure to gather sufficient competent audit evidence, failure to exercise due professional care, and an insufficient level of professional skepticism.
During the 13-year period from 1998-2010, there were 87 sanctions against external auditors in SEC fraud investigations involving publicly traded companies, according to the study, by professors Mark S. Beasley of North Carolina State University, Joseph V. Carcello of the University of Tennessee, Dana R. Hermanson of Kennesaw State University, and Terry L. Neal of University of Tennessee.. Approximately 9,500 entities file financial statements with the SEC on an annual basis.
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