Are audited financial statements reliable

I am reading the article on the BBC website "Lehman Brothers Bank Collapse" dt 16-Sep-2008.

The company is an investment bank that specialises in big and complex deals and investments.
Despite this, Lehman's collapse and the troubles of other financial institutions will probably be felt by millions of people around the world - at least indirectly.
Most of our banks and pension funds have dealings with Lehman, or with firms like hedge funds that traded extensively with Lehman.
Unwinding Lehman's complex deals will take months if not years. During that time the global financial system will be snarled up. Many banks won't know for sure how much they are exposed to Lehman, and will have difficulty freeing up the money in those deals.
This in turn is likely to intensify the credit crunch, with potentially dire consequences for businesses and consumers.

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The other article "Three deadly sins of portfolio credit risk management" published in June 2002.

Three deadly sins lie in wait to wreak havoc on a portfolio: a disproportionate percentage of the portfolio in the low pass categories; emphasis on higher-risk types of lending; and concentrations that build in the portfolio with a small group of borrowers. Some banks commit multiple sins--aggressively underwriting individual loans to borrowers in higher-risk types of lending and taking large positions in those loans. How does your bank fare? Is it time to pass out the pitchforks?

Prem Sikka in his article "The Auditors have failed" in Guardian explains how the top audit firms had given a clean chit to the companies whose survival today is doubtful. Moreover the audit firms have charged an atrocious amount of fees for performing the job. The directors also had fat cheques to take home.

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The question is

whether auditors should rely on management representation while commenting on true and fair view of the Balance Sheet ? Or do they have go further to investigate in the dealing to see whether they have any material impact on the financial statements ?

The reason for the fall of Lehman Brothers only became known when the bank collapsed. Who knows how many such caskets will opened to know the magnitude of damage. Should the auditors gone into the trail of the dealings to confirm the representations made by the management is correct !!!

Or to protect themselves from neglience, should the auditor insist on the management for an expert opinion in all aspect of the Balance Sheet. E.g.

Bad Debts Provision - Assessment from the legal department of the company
Brand value and goodwill - Expert opinion from valuerers
Fixed Assets - Report of the surveryor
so on and forth.

Just like how a jury relies on the experts opinions and finding on a case, should the auditor follow a similar trace. Top firms, I am sure, they should be following the convention. I don't understand how does collapse of such magnitude is trigged every 4 years.

The other question that is raised frequently is the audit fees are exhorbitant. Big 4 firms audit more than 80% of the fortune 1000 companies in the world.