Sunday, November 17, 2013

Why Experts Do NOT Add Credibility To A Company

O RLY (Photo credit: Wikipedia)
One of the most often heard excuses thrown at the MLM Skeptic is "so and so is involved. So and so is an expert and thus Acme XYZ can't possibly be a scam".

And two of the most favorite experts used for pseudo-legitimacy are lawyers (esp. MLM lawyers), and accountants, esp. auditors.

Frankly, many lawyers are so blind or so suave their testimony is completely worthless.

While I hate to bring up an old issue, it is worth pointing out that Gerald "Gerry" Nehra of Nehra and Waak, one of the more prominent MLM lawfirms, had a reputation of pointing at ponzi schemes and said "not Ponzi". He did so first with Ad Surf Daily (and testified in court to that effect), then did the same with Zeek Rewards (his and Waak's name were on the final Zeek creditor's list). Their involvement was touted highly by participants of both schemes as "proof" that the "business" can't POSSIBLY be illegal. Yet both were shut down as scams.

(And it's noted that another person who told people that both ASD and Zeek are not Ponzis... Keith Laggos, MLM consultant)

Just because lawyers said something legal doesn't make it legal.

But what about accountants?

Frankly, accountants are even LESS useful to validate a business, as the books are often "cooked".

Yet it's interesting how some accounting firm's name are waved around as badges of legitimacy. One of the most popular is Ernst & Young's "Young Entrepreneur" award, where even being named as a "finalist" is some sort of "proof" that the company can't possibly be a scam. The folks who believe this somehow believe that in order to be nominated, the company had to have been audited from head to tail by E&Y, when no such thing ever took place.

An accountant's job is not to tell you that a company is solvent, or legal, or such. An accountant's job to to help the client crunch the numbers, using the proper accounting rules and methods.

And auditor may detect some fraud, sometimes, but often that is NOT their job to find accounting fraud. The audit is to reveal any accounting MISTAKES, not deliberate fraud.

In fact, read this article by Tracy Coenen, fraud investigator and CPA, that explains why audit are NOT supposed to find accounting fraud.
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