Accounting Frauds: ZZZZ Best Company, Inc

1022 WordsNov 18, 20115 Pages
ZZZZ Best company is one of the biggest examples of Accounting Frauds. The founder of ZZZZ best was Barry Minkow. He was a very smart young entrepreneur when he started the company. He was involved in credit card forgeries prior to starting his own carpet cleaning business “ZZZZ Best Company”. Minkow began his business with small carpet cleaning jobs and he became a multimillionaire in a very short period of time. Minkow met a person named Tom Padgett at Los Angeles Health club. This was the beginning of Minkow's big fraud scheme. Padgett was the insurance claims adjuster and Minkow became his friend. After becoming Padgett's friend, Minkow thought of using his friendship with him to make profit in his business. He convinced Padgett to…show more content…
It was stated in the article that Minkow was involved in credit card forgeries at a very young age prior to starting his own company. This was the time when investors and others associated with ZZZZ Best started to step back. This was a major reason that concerned Ernst & Whinney about ZZZZ Best. In addition to the news article, Ernst & Whinney also received a letter from an anonymous writer, who warned them about the fraud in ZZZZ Best. It was stated that the assets of ZZZZ Best are not properly reported and the insurance restoration contacts were all fraudulent. Ernst & Whinney questioned Minkow about the fraudulent Insurance restoration contracts but Minkow was able to prove them that the contracts exist. He gave them the address of a building that was being restored and he bribed the security guard and others to tell them that the building is contracted under ZZZZ Best Company. This was sufficient to prove Ernst & Whinney that the contracts stated in ZZZZ Best financial statements were accurate and they did exist. In spite of that, Ernst & Whinney did not audit the ZZZZ Best in 1987 due to Minkow's bad reputation and the news about the fraudulent contracts. Minkow was successful in getting away from another audit and continued operating his firm with all the fraudulent contracts and other credit card frauds. According to my understanding of this case, I think that the auditors should be

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