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September 27, 2016


Randy Green

Hi Jim -

First, outstanding blog. Really enjoyed going back through previous posts.

Regarding the EY/Ventas affair (no pun intended), however, I disagree with your conclusion that the SEC guidance is insufficient. In what alternative universe would anyone believe that an illicit affair between the lead auditor and the CFO of a publicly traded company would not compromise independence? Apparently the two parties engaged in the affair believed it was an issue, as they strove mightily to keep it under wraps.

Whether or not audits, as currently constructed, are actually a valuable exercise is one discussion. But these two knuckleheads knew what they were doing was wrong under existing legal, professional and ethical rules. No sympathy for them.

And your observation related to the stock price impact strikes me as too one-dimensional. Many, many other factors impacted stock price during the period under discussion.

Let's think of it this way - if I had $1,000 to invest in either Company A or Company B, and I knew Company A's auditor and CFO were sleeping together, I'm guessing I might be more inclined to consider Company B.

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