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Internal Controls Issues Behind Many Auditor Changes

Taub Stephen | December 14, 2004

Nearly one of 10 companies that has changed auditors so far this year has also reported internal control issues.

That's according to an in-depth analysis conducted by Manchaug, Mass.-based, which found that 1,647 companies reported a change in auditors through Dec. 6. And 152, or more than 9 percent of the total, had disclosed internal control issues.

More than half of those 152 companies dismissed their auditors, while in 71 cases—or 47 percent of the cases—the auditor resigned, according to the study.

Disagreements A "Big Deal"

In general, over the past four years, 18 percent to 34 percent of all auditor changes have been resignations, suggesting that when there is an internal control issue, the auditor is increasingly likely to resign.

Joe Cyr of stresses that internal controls are flagged when an...

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