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At some point, auditors have to trust some things that their subjects are saying. If the auditor has to re-evaluate every piece of information, they will end up

by nickff 5y ago

At some point, auditors have to trust some things that their subjects are saying. If the auditor has to re-evaluate every piece of information, they will end up re-doing the subjects' jobs.

calvinmorrison 5y ago
And that's how we got the VAG emissions scandal. Instead of trusting computer outputs, we could have done tried and true dyno tests and the entire thing would have been avoided.
- maxerickson 5y ago
  The defeat devices were designed to detect dyno conditions and reduce emissions, it wasn't a case of a regulator trusting a computer output. They were uncovered by doing road tests.
  - lazide 5y ago
    Which a competent regulator would surely be doing randomly across the industry no? If all they are doing is trusting what the regulated folks are saying they are doing, that isn’t what I would call effective regulation.
    - nickff 5y ago
      Most regulators don’t verify much, (the SEC almost never actually looks at bank account balances,) they just look for inconsistencies in the information they receive.
      - lazide 5y ago
        The SEC isn’t regulating banks generally so bank account balances shouldn’t matter much - they are regulating security markets no? So looking at discrepancies between data from market participants IS verifying and regulating. Same as if the FDA looked at raw study data and compared it to equivalent studies for similar types of drugs/treatments, or the FAA had an engineer on staff to double check elements of a new design from a major manufacturer for plausibility
        nickff 5y ago
        I meant to imply that the SEC could check companies' bank accounts to verify the truthfulness of balance sheets and income statements.
        lazide 5y ago
        True, though with the way GAAP and accrual accounting works (generally cash balances are only tangential to income, expenses, or even assets once you get past small to medium businesses), and the scale and number of accounts most businesses have, that’s a lot of work for a very muddied view of what is likely happening outside of some specific circumstances like a depository, clearing house, or the like. That I somewhat like counting the number of bolts ordered and delivered by Boeing to ensure they are staying compliant with building their airframes. If they never order any, or there aren’t many arriving where you expect, is that a problem? Sure, though it’s probably a subcontractor ordering them, or they haven’t bought any when you were looking because they have a large stockpile, or whatever.
tyingq 5y ago
There's a bit of backstory here where things the auditors used to verify first hand devolved into from-a-distance. And too friendly a relationship with the businesses they were auditing.

by nickff 5y ago

At some point, auditors have to trust some things that their subjects are saying. If the auditor has to re-evaluate every piece of information, they will end up re-doing the subjects' jobs.

calvinmorrison 5y ago

And that's how we got the VAG emissions scandal. Instead of trusting computer outputs, we could have done tried and true dyno tests and the entire thing would have been avoided.

maxerickson 5y ago
The defeat devices were designed to detect dyno conditions and reduce emissions, it wasn't a case of a regulator trusting a computer output. They were uncovered by doing road tests.
- lazide 5y ago
  Which a competent regulator would surely be doing randomly across the industry no? If all they are doing is trusting what the regulated folks are saying they are doing, that isn’t what I would call effective regulation.
  - nickff 5y ago
    Most regulators don’t verify much, (the SEC almost never actually looks at bank account balances,) they just look for inconsistencies in the information they receive.
    - lazide 5y ago
      The SEC isn’t regulating banks generally so bank account balances shouldn’t matter much - they are regulating security markets no? So looking at discrepancies between data from market participants IS verifying and regulating. Same as if the FDA looked at raw study data and compared it to equivalent studies for similar types of drugs/treatments, or the FAA had an engineer on staff to double check elements of a new design from a major manufacturer for plausibility
      - nickff 5y ago
        I meant to imply that the SEC could check companies' bank accounts to verify the truthfulness of balance sheets and income statements.
        lazide 5y ago
        True, though with the way GAAP and accrual accounting works (generally cash balances are only tangential to income, expenses, or even assets once you get past small to medium businesses), and the scale and number of accounts most businesses have, that’s a lot of work for a very muddied view of what is likely happening outside of some specific circumstances like a depository, clearing house, or the like. That I somewhat like counting the number of bolts ordered and delivered by Boeing to ensure they are staying compliant with building their airframes. If they never order any, or there aren’t many arriving where you expect, is that a problem? Sure, though it’s probably a subcontractor ordering them, or they haven’t bought any when you were looking because they have a large stockpile, or whatever.

tyingq 5y ago

There's a bit of backstory here where things the auditors used to verify first hand devolved into from-a-distance. And too friendly a relationship with the businesses they were auditing.