Filed under: Scandals, Money and Finance Today, Personal finance
The $50 billion Madoff Securities scandal could have been prevented easily. So could much of the corporate and investment fraud that’s taken place over the last couple of decades. Why? All these frauds shared at least one thing in common — the people who committed them all produced their own financial statements. In my limited experience in academia, I have never seen a single student grade their own test or paper. So why should business executives be able to write their own report cards?
We don’t know much about the Madoff scandal, but there’s no question that Madoff securities could not have gotten away with it if a completely independent entity had been generating financial statements for investors. Instead of spending decades cranking out fraudulent statements that showed investors making 10% returns each year, an independent auditor would have stopped Madoff in his tracks.
Of course, for such an independent entity to work correctly, it would need to be structured, paid and staffed in the right way. As I suggested in Value Leadership back in 2003, the government would create an independent group of auditors who would create financial statements for investors. This group would be paid from taxes levied on corporations and its people would be promoted based on their ability to geneate timely, accurate, and thorough financial statements.
Continue reading A simple solution to investment fraud
A simple solution to investment fraud originally appeared on BloggingStocks on Sat, 13 Dec 2008 14:10:00 EST. Please see our terms for use of feeds.
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