Cardozo Case Summary

In this case, there are several conspirators who is involved in the fraud receiving punishment from either SEC or federal government. Robert Levin, the AMRE executive and major stockholder, and Dennie D.Brown, the company’s chief accounting officer, were subject to the punishment in the form of a huge amount of fine by the SEC and the federal government. This punishment came from reasons. After AMRE going public, the company have the obligation to publish its financial reports but its performance did not meet expectation. The investigation by SEC shows that Robert took the first step of this scam, fearing the sharp drop of AMRE’s stock price because of the poor performance of company. He abetted Brown, to practice three main schemes to present a false appearance of profitable and pleasant financial reports. Firstly, they instructed Walter W.Richardson, the company’s vice president of data processing, to enter fictitious unset leads in the lead bank and they originally deferred the advertising cost mutiplying “cost per lead” and “unset leads” amount, so that they deferred a portion of its advertising costs in an asset account. The capitalizing of advertising expenses allowed them to inflate the net income for the first quarter of fiscal 1988. Secondly, at the end of the third and fourth quarters of fiscal 1988, they added fictitious inventory to AMRE’s ending inventory records, and prepared bogus inventory count sheets for the auditors. Thirdly, they overstated the percentage

Between the years 2000 and 2002 there were over a dozen corporate scandals involving unethical corporate governance practices. The allegations ranged from faulty revenue reporting and falsifying financial records, to the shredding and destruction of financial documents (Patsuris, 2002). Most notably, are the cases involving Enron and Arthur Andersen. The allegations of the Enron scandal went public in October 2001. They included, hiding debt and boosting profits to the tune of more than one billion dollars. They were also accused of bribing foreign governments to win contacts and manipulating both the California and Texas power markets (Patsuris, 2002). Following these allegations, Arthur Andersen was investigated for, allegedly,

This case established that an auditor could be sued by a primary beneficiary for damages from negligence. A primary beneficiary is a party that has a direct benefit from the audit. Non-privity parties could also sue for gross negligence. This increased the auditor’s legal exposure to third parties. The SEC of 1934 reflected these changes and many others; one significant change was that auditor’s had a much higher litigation risk due to their new responsibility to third parties.

I am nominating CBPO Juan Cardoza for an employee award for his motivation in promoting the mission of CBP for the Port of Eagle Pass. CBPO Cardoza is currently assigned to the Passenger Processing Section for the Eagle Pass POE and has had one enforcement action this past 1st Quarter of FY17.

a. I think Bobson & Lleyton will be liable to Asheville Furniture for the purposeful overstatement of inventory on Sleep Time Beds’ books. B&L’s managing partner violated AICPA code of professional Conduct by colluding with its clients to inflate its inventory. He rendered himself independent during the engagement, because he possibly took bribe from the management and agreed to be part of the corporation. The accounting firm was also liable becasue the managing partner actively participated in fraud. The overstatement in the financials could directly cause damage for Asheville Furniture, who is the user of the audit report prepared by B&L.

AICPA Code of Professional Conduct principles prevents vises such as fraud that are experienced in accountancy field. Audit is the best measure of the effect of the fraud that are imposed to investors by accountants. The relationship of the investors and account holders are supposed to be affirmed through auditing to ensure accounting principles are upheld(Weirich, Pearson, & Churyk, 2010). Improper loss of the funds through propagation of the accountant officer should be treated as fraud and criminal activity that should lead to prosecution. Therefore, the paper seeks to relate two fraud cases that have been audited and presenting AICPA Code of

As laws and regulations continue to grow and become more complex, the need for forensic accountants is sure to continue growing as well. An example of how regulations have grown (mirroring the demand for forensic accountants) can be seen by comparing the scope and length of the Sarbanes-Oxley Act of 2002, at 66 pages, to the 849 page Dodd-Frank Wall Street Reform and Consumer Protection act of 2009.(Tucker, 2011) It is the environment created by such complex regulations and oversight committees that has hedged the need for accounting experts who can help demonstrate both the effects of individual companies on overall markets, as well as the opposite effects of market-happenings on individual firms. This complicated data, made comprehendible by a talented and effective forensic accountant, can serve as the determining factor in a case. Ultimately, this allows for

Privity of contract law restricts third party users of suing a professional. This law, however, has narrow scope and therefore new methods have emerged in order to protect third-party users. The first test is called the Ultramares test. Under this test, the third party must be a foreseeable user of the information provided by the accountant. First the CPA must know the name of the party using the information, the purpose, the extent of use, and the client intents to deliver this information primarily to the third party. In this case the CPA was not aware of the name of any third party user, but knew the end users would be investors, he knew that it would be used for an IPO since he audited the financials used in the registration statement. As a result, a judge would must likely find the CPA liable, however since he did not know the names of the third party, that can serve as a defense.

As a CPA Eric must comply with the use Generally Accepted Accounting Principles (GAAP) as a guide in recording and reporting financial information, and to perform any service. When Eric carelessly overstated net sales and profits for the current year not only is not following these principles but he breached his duty of care. Eric will face civil liability under common law if the company has to incur any loss due to any kind of the carelessness of Eric.

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

Upon review of the facts given from the case, there is fraud that is transpiring in regards to Back-In-Time and Dewy Knownun and Howe, Inc. (DKH). The main issue presented in this case was the fact that Tonya, a CPA whom performed services for Back-In-Time Industries Company for over five years as an Assistant Controller, was assigned to the internal controls area of the Accounting Department for the publicly traded company. Tonya did have to sign a Non-Compete and Non-Disclosure Agreement upon employment. According to the facts, Tonya discovered that per the company’s method for processing invoice payments, even though it appears that the invoice was paid, there is a delay in payment to most, if not all, of the vendors and creditors. The company is 18-24 months behind on some payments, and long-time vendors are threatening to cut off the company’s line of credit and stop delivering products needed for the company’s production.

The executive director recreated one of our vendor’s invoices and charges thousands of dollars throughout the years. When it comes to the accountant, she used the business credit card to purchase personal things, she also change the numbers on the bank reconciliation, which was done by hand.

The third moral issue in Tyco case that identify with irreconcilable circumstance is bookkeeping misrepresentation. Bookkeeping misrepresentation can be depicted as any demonstration or endeavor to control the monetary explanation for monetary benefit. It can be one of the legitimate issues for this situation on the grounds that it comprises of extortion which is unlawful in composed law. The irreconcilable situation emerges for this situation on the grounds that the reviewers, bookkeepers, and administrators of Tyco International dissolve trust and their own advantage has enormously fluctuated with the enthusiasm of shareholders and the partners in Tyco. They tend to give up the nature of money related reporting data for their own advantage.

The main issue in this case is that in the standard audit reports that go with the financial statements, “the auditor’s responsibility for detecting fraud is not discussed (Mancino, 1997)”. This is occurring because “auditors do not examine every transaction that happens or event and that would mean there is no guarantee that all material misstatements, whether caused by error or fraud could be detected (Mancino, 1997)”. There should be a spot on the audit report that states the auditor’s roles and their limitation into finding fraud. “There also seems to be some issues between the rules of the PCAOB has and the language that auditors use in their reports do not match (Holl, 2005)”. They should add a phrase to their audit reports that says it was either caused by error or fraud and to take accountability of knowing fraud had happen since it is the auditor’s job to show that the financial statements are free of material misstatements. Another reason this is occurring is the fact it is pretty much a pass or fail type of report it is not very detailed.

Needed for the Houston office of Andersen, an audit partner that understands the role of being a "public watchdog" with "ultimate allegiance to the creditors and shareholders" . Arthur Anderson abandoned its roles as independent auditor by turning a blind eye to improper accounting, including the failure to consolidate, failure of Enron to make $51million in proposed adjustments in 1997, and failure to adequately disclose the nature of transactions with subsidiaries . Another example is Lord Wakeham joined Enron as a non-executive director in 1994 and also sat on Enron's audit and compliance committee. In addition, Andersen also provides internal audit service to Enron, which in fact impact