Friday, March 08, 2002

ACCOUNTING STATEMENT INSURANCE: In the NYTimes this morning, an editorial advocates "financial statement insurance," as a market-based remedy to accountants' conflicts of interest. A corporation would buy financial statement insurance from insurers. This insurance would compensate shareholders for cooked books. Shareholders could evaluate their risk, by determining (1) the corporation's policy limits and (2) the premium being charged the corporation. The insurers, in turn, would be responsible for audits, using them to set premiums for the corporation's insurance policy. What a good idea!

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