Accounting scandals have been in the spotlight in recent months. Companies such as Wirecard (ETR: WDI) and Luckin Coffee are two of the more recent high profile cases that have cost investors billions of dollars.

Worryingly, both companies were given a pass from reputable auditors before their respective cases blew up. As investors, we rely on external auditors to give us a sense of the company’s financial well being. But with the latest scandals, can we truly trust an auditor’s stamp of approval?

Nothing new

There have been many high profile accounting scandals over the past few decades.

One major example that comes to mind is the accounting scandal of Waste Management Inc. In 1998, the company was revealed to have faked over US$1.7 billion in earnings from 1992 to 1997. Then CEO, A. Maurice Meyers was eventually found guilty along with other top executives and the SEC (Securities & Exchange Commission) fined Arthur Anderson