Do auditors have a liability over sub-prime .....

Do auditors have a liability over sub-prime .....

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Presumably they must have been aware of the underlying contents, exposure & rating of all the instruments being traded - how else could they have given a clean bill of health to these organisations in their audit?

One of the problems with sub-prime debt is that a lot of financial institutions are prohibited from taking it on because it is regarded as too risky; however, once it becomes securitised it acquires the veneer of acceptability and can be held

CDO entities are not limited to just one type of bond and in fact are sold with differing degrees of credit risk, with the most risky generating the highest yield. This is fine when interest rates are low and money is freely available, however, did the auditors recognise the exposure of raised interest rates and falling house prices ?

With this in mind, precisely what steps did the auditors take to quantify the underlying class of assets and the ensuing risk/exposure from additional contracts such as "liquidity put's" forcing Banks to take additional problems onto their books; also did they also take account of any associated SIV's (Special Investment Vehicles) ?

Of course the knock on effects of an audit failure of this magnitude is a financial responsibility to the shareholders. Surely, therefore all those shareholders who relied upon the Banks Accounts to reflect the true position and subsequently purchased shares which have dropped in value by 1/3 or more have a valid case for recompense against the auditors?

jc

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By AnonymousUser
07th Mar 2008 13:52

If...
..."investors purchased shares which subsequently dropped in value by 1/3rd," they have only themselves to blame for not having more foresight than the auditors.

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