randomep Posted February 1, 2014 Share Posted February 1, 2014 hi, I am in the process of going more and more into smallcaps. But with smallcaps the big issue is fear of the unknown. The logic goes that big companies have more people scrutanizing them but small caps are less so. So small caps are more "risky". However as with many things in investing the theory or instinct doesn't jive with reality. And this may be one of those cases. So I wonder if anyone has experienced or know of small caps where the stock tanked because the world found out about company/accounting fraud. For example, let's say a company's netnet is based largely on its inventory but the inventory is exaggerated. The key mechanism to prevent fraud is the audit. But what if the auditor is not a nationally known firm. What if it is a 1-man shop. What then? How can I check up on the integrity of the accountant? Link to comment Share on other sites More sharing options...
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