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Part II: The Tools > Investigation: Verifying the Financials

Chapter 6. Investigation: Verifying the Financials

The traditional assumption understood by every investor, analyst, and planner has been based on trust. As long as a corporation presented an independently audited statement complete with an unqualified opinion letter, we knew that we could depend on the numbers.

Today, we face a troubling, new environment. Everyone has had to contend with the reality that we cannot simply accept the numbers presented in an annual report, even when the numbers have been investigated by a professional auditing firm. We now know that the glaring conflicts of interest on the part of those auditing firms contradict the requirement of objectivity and fairness. Auditing firms receive more than half their income from nonaudit work, so they cannot be objective in expressing an opinion about the accuracy or reliability of the numbers; there is too high a level of income earned from the same client.


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