To comply with regulations, big companies must hire external auditing firms, but I don’t see how an auditing firm can be impartial when their source of revenue comes from the firms they audit.
More impartial than the people they are auditing
and you can choose to follow their advice or not, but better than having the Gov’t find something first
In general, I think big companies want to know if there is a problem. Because they don’t want John in accounting to keep embezzling money year after year without getting caught.
Sure, there’s some incentive to be generous in their reserve ranges and other stuff, but there is a lot that external audit does that is critical to ensuring that bad practices don’t take a company down.
or John is a dumbass, who actually just made up what he thought were the right way to set reserves
They’re paid first. So there’s no incentive to say “positive things” just to get paid.
Can’t say the same for an internal audit set up.
only if you disregard repeat business
I think it’s important to acknowledge that it’s an issue. Auditors are probably more useful in teasing out issues like John in accounting embezzling money or Jane in actuarial who doesn’t know what she’s doing.
They are considerably less useful in protecting the public from a conspiracy by management to pad the numbers / deceive the public.
And I assume we all have ludicrous auditor stories stemming from them not knowing WTH they are doing… I know I do. But I have to begrudgingly admit that I’ve also seen them catch a mistake or two that slid by unnoticed for longer than they should have.