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January 03, 2010


J.D. Kern

Reading this, I could hear echoes of Taleb's popular "Black Swan." It's not exactly the same, but auditors are good at analyzing and staving off risk eminating from the fat section of companies/transactions that fall in the middle of the bell curve. Their problem is the big, heavily consequential outlier.


JDK -- Thanks and amen. Taleb's work figures importantly in my MBA-level course in risk management -- where an important point is that it is precisely the "big, heavily consequential" events that really make a difference in our lives. For the Big Four, those would be the rare but devastating lawsuits or regulatory proceedings -- those with potential to blow up the entire structure.


The biggest and most obvious problem has never been addressed which is the auditors work for management. The auditors must follow strict standards, but when exercising judgment the auditors will generally side with management. As they say, "we would not object" to such and such a treatment. It gives the auditors an out. We did not bless that treatment, but it was reasonable.

The best idea I have heard is the the auditors are selected by the stock exchange where the company is listed and the auditors report to the stock exchange. Maybe the exchanges could do a better job policing the auditors, the SEC surely hasn't done a good job.

Chicago bankruptcy lawyer

Here are five things to focus on during recession : Clean up your balance sheet, Think ahead, Consider a career shift, Remember that everything is cyclical,Develop a skills portfolio to go.

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  • © 2007-2024 James R Peterson Special thanks: Francine McKenna. Always with love: Kat and Julie. In memory: Bob White, Stuart Kadison