Before issuance, most corporate and governmental bonds receive a…
Question Answered step-by-step Before issuance, most corporate and governmental bonds receive a… Before issuance, most corporate and governmental bonds receive a credit rating that usually ranges from a high of triple-A down to B-. Nearly all bond ratings are issued by one of three credit rating servicesMoody’s, Standard and Poor’s, or Fitch. A bond issuer selects and pays one or more of these companies to issue a credit rating on its bonds. Literally trillions of dollars are invested each year in the bond market, in part based on the credit ratings issued by these private, for-profit companies.Because bond issuers select and compensate the rating services that evaluate their creditworthiness, these agencies have an overwhelming conflict of interest. Critics contend that these credit rating services enhance their ability to generate repeat business by giving bond issuers unduly favorable evaluations. Supporters of the current system disagree, noting that these companies’ survival depends upon them maintaining reputations for credibility and objectivity. Do Auditors face a similar conflict of interest in certifying their clients’ financial statements? Business Accounting ACCT 409 Share QuestionEmailCopy link Comments (0)
