Kpmg Was Sued

Good morning, your Honor. I am Theresa Pacholik and I am representing Group One. Please let me introduce my colleagues: Chelsea Rowell, Miles Brown and Kimberly Hudson. We come in front of you today with our clients, the Office of Comptroller of Currency (OCC) to show why the court should uphold the decision of the district court against Grant Thornton LLP (Grant Thornton). We will discuss the negligent actions performed during the audit conducted by Grant Thornton and how their unsafe and unsound practices impacted First National Bank of Keystone (Keystone Bank) regulators, shareholders and the public.

An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002

There were two external auditors mentioned in the case that dealt with ZZZZ Best. The first was not a firm that was included in the Big Eight accounting firms at the time. George Greenspan was the sole practitioner who performed the first full-scope independent audit for ZZZZ Best. Greenspan insisted that he had properly audited Minkow’s company, and testified that while planning the audit he had performed various analytical procedures to identify unusual relationships in ZZZZ Best’s financial data. Greenspan’s procedures reportedly included comparing ZZZZ Best’s key financial ratios with its industry norms. Greenspan identifies “unusual relationships” but does not go into detail in order to explain these unusual relationships. This shows that Greenspan did not show enough professional skepticism while conducting the audit and just blew off these unusual relationships. Also Greenspan testified that he had obtained and reviewed copies of all key documents that pertained to the false insurance restoration contracts. It would have been hard for Greenspan to uncover the fraud through the contract paperwork because Minkow and Morze went through such great detail in creating false documents in order to cover the false contracts, but finer details were overlooked by Greenspan. A journalist found one of these finer details which caused the domino effect leading to the destruction of ZZZZ Best. This shows that the first auditor,

Without a question the BOD should have placed a high degree of reliance on Andersen, which at the time was one of the most prestigious worldwide accounting firms. The auditors should have known the kind of accounting taking place in Enron. In my opinion, Andersen knew, at least to some extent, the company’s financial condition. However, Enron was already too deep under water that blowing the whistle so late would have created problems for Andersen as well. According to the case, on 02/05/01, Andersen held internal meeting during which it addressed the company’s accounting from and oversight of the LJM partnership. Andersen never discussed these concerns with the Audit and Compliance Committee. Although the BOD has its faults, it should have been able to rely on Andersen’s work.

Using Analytical Procedures as Substantive Tests By Frank A. Buckless and D. Scott Showalter, NC State University

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,

In 2005, NIC was dissatisfied with a decision the independent audit firm made to replace an engagement Partner. Although, nearly complete with the Audit, the new Partner was not willing to rely on the finding of the previous Partner, which prolonged the audit (Weirich). Deloitte had been NIC auditor since 1908 and the business community was shocked to learn of the termination of their relationship. After 98 years as their accountants Navistar filed a lawsuit against Deloitte for 500 million dollars for allegations of malpractice that caused the manufacturing company to revise its financial statements. According to law360, “Navistar claimed that Deloitte accountants misrepresented them between the years of 2002

This memo is regarding Hamilton Corporation and the fraud that occurred. When people make decisions they don’t always do it with the right mindset. There are limitations in our judgment processes and we can identify methods to mitigate bias and improve judgment (KPMG Judgment Framework). The four common tendencies that cause limitations in our judgment processes are, availability, confirmation, overconfidence, and anchoring. In this memo I will explain each of the four tendencies, talk about which tendency I believe to have manifested in the Hamilton case, clarify issues relating to auditing the warranty reserve and describe the alternatives that should be considered in auditing the warranty reserve, and finally provide factors that

As a result, in this case, I do believe that Deloitte & Touche were guilty of the overall malpractice that was finalized

3. In testimony before Congress, George Greenspan reported that one means he used to audit the insurance restoration contracts was to verify that his client actually received payment on those jobs. How can such apparently reliable evidence lead an auditor to an improper conclusion?

Ernst & Whinney audit firm suffered tremendously from the backlash of ZZZZ Best’s case. One of the issues stemming from ZZZZ Best’s case is the difference between a review and an audit as evidence by civil suit filed by a California bank against the firm. The bank claimed that its decision to grant ZZZZ Best’s loan was based on the opinion of Ernst & Whinney review of ZZZZ Best’s financial statements period ending July 31, 1986. The case was ruled in favor of Ernst & Whinney as the audit firm had expressly stated in their report that it was not issuing an opinion and the bank should not have rely heavily on the review report. Also, ZZZZ Best was a public company at the time, a review of its

KPMG was one of the biggest accounting firms in the 90’s that with a lucrative end, would serve wealthy companies using forged revenues in order to avoid taxes. The accountants that worked for the firm were expected to meet certain quotas. Consequently, instead of trying to run an honest business they were trying to maximize the sales using all kinds of dishonest marketing approaches. KPMG employees used foreign banks as well as bogus law firm statements to preserve a legitimate business running. This accounting firm manipulated financial data of clients, costing the internal revenue service over 2.5 billion in lost tax revenue

Finding of fact #1: The first finding of fact in this case involves corruption in the company.  According to Sylvia Vega-Sutfin, a former employee of BNC, the bribes known as spiffs are common in the company. She states that most of the underwriters in the company demanded bribes so that they can approve the loans. These claims of corruption or bribery are supported by Colombo, who claims that one of her fellow employees, a male wholesaler, brought her loans with questionable information such as incorrect salaries and home values, and that the male wholesaler even tried to bribe her so that she can allow a loan with incorrect information to be approved.

General Standard #2: The auditor must maintain independence in mental attitude in all matters relating to the audit (AICPA, 2012). Anderson did not practice independence from the company they were auditing. They were too involved in too many of Enron’s activities.

Disregarded Enron’s accounting misbehave and Misuse. CFOs and controllers hired by Enron company were former Arthur Andersen LLP executives; shredded all Enron’s documents, and Arthur Andersen LLP attorney altered documents related to its audit work for Enron. Arthur Andersen LLP has been handed the maximum penalty allowed under US law for its role in the collapse of Enron. Arthur Andersen LLP CPA License has