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Chapter 13. Where Were the Auditors? Cou... > Red Flag 6: If an Audit Committee Hi...

Red Flag 6: If an Audit Committee Hints at Internal Conflicts or Accounting Concerns

Under the new law, it will be much more important than in the past to read the annual report of a board’s audit committee, which should be in the proxy statement (or annual results). The report may indicate whether there have been any clashes among management, the auditor, and the audit committee over how conservative or aggressive—which often means how close to the edges of legality—the company’s accounting policies are. The audit committee members will want to protect themselves from any litigation if there has been fraud on their watch, so they are more likely to disclose any problems promptly.


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