Never trust the auditors! If you do not believe me just read Financial Shenanigans, one of the best books on accounting. Looks like john Paulson got involved in a Chinese fraud company. Even the “big 4” cannot be trusted, and with the little accounting firms forget about it. If anything looks suspicious do not feel confident, because even with an “unqualified” stamp of approval, the auditors might have a conflict of interest or be duped by the company. It is interesting how the auditors played a very similar role in the financial crisis to the rating agencies, but did not get nearly as much blame. Both had conflicts of interests and signed off on products which logic should have warned against, and in some cases there was clear fraud. The two are not a straight comparison, but it seems they had very similar functions, and made similar mistakes.
It could be John Paulson did not trust the auditors and did lots of due dillegence, but this should be a lesson for us all regardless.
Paulson & Co., the $36 billion hedge fund run by John Paulson, may have lost about C$317 million ($325 million) in two days on its stake in Sino-Forest Corp., the Chinese forestry company accused of overstating timberland holdings and production. Deirdre Bolton reports in today’s Movers & Shakers on Bloomberg Television’s “InsideTrack.”
