Case Analysis : The Fraud

1004 Words Nov 16th, 2015 5 Pages
The fraud was carefully carried out over several years by individuals at several organizational layers, including the president, CFO, COO, vice president of marketing, director of accounting, controller, and a host of others.
Although the fraud itself did not indicate that the audits had failed, the investors and creditors held that Coopers failed to follow GAAS throughout their audit. Consequently, these plaintiffs felt the auditors were responsible for the losses. The five-month trial concluded that a five-year fraud should have become evident to an attentive audit team. Initially, 38 suits were filed against Coopers. Many settled out of court for undisclosed sums, but eight chose to pursue their claims in a jury trial where Coopers was found guilty under both state and federal law. Following are the several key factors that contributed to the fraud and enabled the senior official to cover up.
• The company did not have an adequate Management Information System(MIS)
• Inadequate internal controls were in place.
• David Shapira, the CEO of the company was informd about the potential problems with Monus’s behavior twice before but he chose not to act.
• Monus and the CFO Finn eliminated the internal audit function to hide the payroll irregularities.
• Collusion among upper management and employees to commit fraud
• The Phar Mor had the knowledge of the audit procedures and objectives, as one of the auditors has worked for Coopers as well as the Phar Mor.
• The…
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