Auditing the Auditors

Buying a car? Umpteen periodicals and Web sites will rate new models for you. Picking a college for your kid? Rankings galore. Heck, if your kid isn't even born yet, you can get reviews of how well the obstetricians at your local hospitals do their job. But what if you want to buy stock in IBM (IBM )? How well does its auditor, PricewaterhouseCoopers, do its job? Is Deloitte & Touche, Microsoft's (MSFT ) auditor, risky? Who's more trustworthy, Ernst & Young or KPMG?

These are uncomfortable questions for the Big Four accountants. Yet for investors, they have become unavoidable. And they're vital if you're on a public company's audit committee. Trouble is, no one has been able to offer many answers. Now, Ross Fuerman, an accounting professor at Suffolk University in Boston, has released research into audit firms' relative riskiness (table). His aim: to monitor and publicize auditors' performance and so improve it. "We can appeal to the moral, ethical, and altruistic impulses of public accountants," Fuerman notes, "but these impulses are lacking in many auditors."