Credit ratings have assumed an increasingly formidable and important role over the years. An increased role and revisions to its foundations, have been triggered, not only in view of the shortcomings of credit ratings based criteria, as revealed through the recent Financial Crisis, but also the need to update Basel II - which has served as the foundation for credit ratings in several jurisdictions. Credit ratings serve various vital purposes, most notably of which include the determination of capital requirements, the identification and classification of assets, and the provision of reliable estimation and assessment of credit risk. The criteria required to be satisfied by credit rating agencies, namely: objectivity, independence, transparency, disclosure, resources and credibility, are closely linked, since the level of comparability and consistency of information provided by such agencies, could also serve as a useful indicator that such information is reliable and credible. In response to the changing financial environment - the evolution and emergence of new and more complex forms of risks and financial products, credit rating agencies have extended their scope beyond the coverage of their traditional products. As well as assessing whether the scope of products presently covered by rating agencies could be deemed adequately relevant to the criteria required to satisfy information being provided as credible, this paper also addresses the reliability of credit scoring methods and models. Are those measures used in estimating the probability of default, namely, financial statements, market prices of a firm’s debt and equity, and appraisals of the firm’s prospects and risk sufficiently indicative as to provide a reliable estimate of the firm's probability of default? The vital role of audits in verifying the credibility of information in financial statements is therefore evident. The reliability and consistency of credit ratings across different jurisdictions, sectors - financial, non financial sectors, and ...
