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The classic post-scandal question to auditors: What happened in the black box?

Tammy Whitehouse | September 12, 2017

The Wells Fargo saga of fake accounts—known to, but undisclosed by, Wells Fargo’s own auditors—is a textbook example of how investors have become fed up with the black box in which audits are performed.

Investors have little insight into what auditors do when they encounter something that ought to smell fishy, like their discovery as far back as 2013 that managers at Wells Fargo were creating accounts by the millions, without customer authorization, to meet seemingly unachievable sales targets.

When news finally breaks, as it did for Wells Fargo in the fall of 2016, it leaves investors wondering what they really get out of a financial statement audit. If routine audit work didn’t drive action to clean up the creation of millions of fake accounts over multiple years, then what’s the point of the audit?

It’s hard to know if it will ever be clear what role, if any, the auditors at KPMG ultimately had in bringing down the hammer on the errant culture at Wells Fargo...

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