After reading this section of the book it made me question the accuracy of most financial statements. It basically stated that you would get what you pay for. Example E3-3 in the book states: "It is impossible for an auditor to "guarantee" that a company's financial statements are free of all error because the cost to the company to achieve absolute accuracy (even if that were possible) and the cost of the auditor's verification would be prohibitively expensive." This tells me that anyone who can afford to pay for the auditor's accuracy will have a more defined annual report.
This worries me because as an investor, how would I know who invested that extra dollar to provide me a more accurate statement? This practice is unfair to consumers across the country. We will not know whom to trust because of doubts we may have regarding each company's financial background. My next question would be is it safe to go with the smaller companies who visibly would not have the finances to pay these high-priced auditor's "accuracy" fees? Or what about the company that has just gone public who may not know about this "pay for absolute accuracy racket"? Is this practice fare to the smaller companies who just may not know or can't afford it? I say it is not fare at all, and there should be someone or some group who monitor's these auditors to make sure that they are doing the best job possible. It is only right that the general public have the most accurate information before being able to make a decision. .
After reading this section, I actually went back to review some of the previous statements I have read and analyzed them. I tried to figure out if I could determine where there could have been a mistake made or where something could have been simply overlooked during the auditor's process. I tried to think like an auditor and tried to figure out what things I would research and where would I overlook a few things.