Essay on Stanford Auditing Case

923 Words Mar 12th, 2013 4 Pages
Allen Stanford was, at one point, a successful entrepreneur whose investment company’s accounts totaled in the billions. The aforementioned keyword is ‘was.’ As CEO of Stanford Financial Group, Stanford essentially ran a massive Ponzi scheme; he issued certificates of deposit at an offshore bank that he controlled and illegally used the investors’ funds. These CD’s were appealing to investors due to their high returns of nearly twice the average rate of return of investments in U.S. banks. Investors were led to believe that these CD’s had such high returns because they were being invested in corporate stocks, real estate, hedge funds, and precious metals (BusinessWeek). The SEC eventually uncovered Stanford’s fraud in 2008. Stanford was …show more content…
BDO failed in its responsibilities to act independently and in the best interests of investors. According to Rule 101 of the AICPA’s Code of Professional Conduct, auditor independence is impaired if during the time of the engagement, the auditor “had or was committed to acquire any direct or material indirect financial interest in the client.” During BDO’s audit engagements, BDO also took part in Stanford’s Task Force. The complaint filed against BDO alleged that, “A key initiative for the Stanford Task Force — fully known to BDO USA — was to amend Antigua’s Money Laundering (Prevention) Act to ensure that “fraud” and “false accounting” did not fall under the Act’s prescribed list of violations.” By participating in the Stanford-funded Task Force and assisting in weakening Antiguan-banking laws, BDO had an indirect financial interest in Stanford Financial Group, thus violating the independence guideline.
By disregarding guidelines addressing audit evidence for investments in securities, BDO violated PCAOB’s Section 332. This section outlines audit evidence and audit risk regarding investments in securities. An auditor is responsible for addressing existence, completeness, rights and obligation, valuation, and presentation (PCAOB). Auditors for

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