Abstract
There has been much criticism of credit rating agencies after the recent financial crisis. In this article, it is argued that the traditional rating agency is in an inferior position to auditors when it comes to the rendering of an opinion regarding the creditworthiness of balance sheet debt. The superiority of the auditor's position flows from the fact that auditors have unfettered access to any and all information that the auditee possesses, whereas the rating agency relies on a surface reading of the financial statements and responses by management to agency inquires. Given the auditor's going concern requirements, it is manifest that the auditor would be in a position to include a credit rating in the audit opinion. Moreover, currently auditors’ audit opinions are binary, that is, pass/fail, whereas in a rating environment the auditor would be rendering a nuanced opinion of the auditee. Ratings rendered by auditors would improve the information content and disclosure quality of financial statements.
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