Auditor Troubles

For those of you with Economist access, there is a good article about auditing firms dumping clients because of the fear of lawsuits. My wife is an auditor for a local firm, and we frequently talk about the problems that arise from her job. Companies and government agencies (her main clients) don't like to get written up for doing things wrong. There is a LOT of pressure put on the auditors sometimes to overlook things, or to write up a good report for the board of directors. If they don't then the company will simply find a new auditor who will. So auditors have no reason, other than their own integrity, to fault these companies for doing things wrong. It is a big deal at the local level, so I am sure it is magnified many times more for auditors of Fortune 500 companies, whose firms also have consulting contracts with their clients.

All the laws in the world are not going to change this situation. What is needed is a change in incentives.