As Prem Sikka says in the Guardian:

The subprime crisis should teach us to keep a much closer eye on company auditors from now on

As he notes:

On February 27 2008, Carlyle Capital Corporation published its annual accounts for the year to December 31 2007. These accounts were audited by the Guernsey office of PricewaterhouseCoopers, the world's biggest accounting firm, which boasts revenues of $25bn.

Amid one of the biggest credit crises, the accounts claimed on page five), that the directors were "satisfied that the Group has adequate resources to continue to operate as a going concern for the foreseeable future".

The auditors were satisfied, too, and on 27 February 2008 gave the company a clean bill of health (page 6).

Less than two weeks later, on March 9 2008, Carlyle announced that it was discussing its precarious financial position with its lenders. And on March 12, the company announced that it "has not been able to reach a mutually beneficial agreement to stabilize its financing".

The company says (page 24) that it paid $2.5m in fees "principally ... to our independent auditors, our external legal counsel, and our internal audit service provider".

Yet In less than two weeks, the mirage of assurance offered by auditors vanished.

But the answer is simple: auditors no longer say accounts give a true and fair view. They say they do so within an 'agreed accounting framework'. That's quite different. The first is offering an opinion. the second is saying all the boxes have been ticked. But if the wrong boxed were ticked, so what?

Why audit if an auditor doesn't offer free opinion? And right now they don't.