When audits go wrong

An auditor verifies the accuracy of a company’s financial records. He or she is supposed to spot any material misstatements, including those due to fraud or errors.And yet in two of the largest financial frauds in history—the 2021 collapse of German payment firm Wirecard and the recent bankruptcy of crypto exchange FTX—auditors had placed a stamp of approval on the companies’ accounts.How did they get things so badly wrong?To find out how audits can mislead I’m joined on the latest New Money Review podcast by Francine McKenna.Francine has worked for many years as an auditor and columnist writing about accountancy. She is currently a lecturer on accounting at the University of Pennsylvania’s Wharton Business School.Listen to the podcast to hear us discuss:What happened at FTXWhy FTX’s audit practices raised red flagsThe dangers of related party transactionsThe Tether and Circle stablecoinsWhy the 2002 Sarbanes-Oxley Act failed to stamp out corporate fraudRegulatory capture and political corruptionWhy audit is a process, not a testHow investors can protect themselves