The Accounting Firm Should Pay Damages Of Funds

The company’s revenues were not growing fast enough to meet these targets, so defendants instead resorted to improperly eliminating and deferring current period expenses to inflate earnings. They employed a multitude of imp roper accounting practices to achieve this objective. Among other things; the complaint charges that defendants:

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,

The auditing firm Coopers & Lybrand was accused of failing to perform a proper GAAS audit. One strategy the auditors could have performed was to follow the trail of revenue vs expenses. The auditor should have notice large sums ($10 million) of revenue going into one particular expense (Suppliers/Inventory). Considering Phar-Mor filed that they lost money in fiscal year 1984 and 1985 and they never cleared

Grant Thornton should be held liable for its reckless negligence because it ultimately prolonged Keystone bank’s ability to continue to partake in fraudulent activities. If the accounting firm would have held itself to GAAS, generally accepted as the minimum standard of professional conduct in performing an audit, Thornton would have known to exercise “heightened skepticism” during this high risk of fraud. Secondly, GAAS required written confirmations from third parties servicing assets in regards to a bank’s balance sheet. Not only did Thornton fail to obtain this written requirement, it also recklessly relied on an oral statement. GAAS also required in a high risk audit that monthly remittances of interest income on assets being serviced by

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.

Of these transactions, most of it was not in the interest of Enron of Enron’s shareholders; such as profits and cash flows were manipulated and grossly inflated which caused misleading to the investors. AA has also failed to recognise the Generally Accepted Accounting Principle (GAAP) – which is accounting rules used to prepare, present and report financial statements for a wide variety of entities used in United States. AA also did not advise Enron’s audit committee that Enron’s CFO – Andrew Fastow – and his helpers were involved in significant conflict of interests. Enron’s politics and internal control was also found out to be inadequate to protect the shareholders interests. These should have made known and clear as these are responsibilities of an auditor. AA has also make the mistake by which it did not act upon evidence found or neither has it find any audit evidence relating to the numerous share rights transferred to SPEs and the side deals between Enron and banks which remove the banks’ risk from transactions. In auditing, audit documentations are key part to the audit processes.

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,

believed to have become a monopoly. Joel Klein was the lead prosecutor for the case. So the

The audit world was transformed more than ten years ago due to a series of accounting scandals. This change took place when The Sarbanes–Oxley Act of 2002, otherwise known as SOX, was passed affecting not only business entities but also the firms that audit those companies (Thomas). One of the companies whose fraud was unmasked by the passage of SOX was HealthSouth Corporation. A company in the healthcare industry who had overstated about $2.7 billion dollars in earnings since 1996. The company’s CEO, Richard Scrushy, was the first to be tried under SOX for misrepresenting and signing off on misleading financial statements(Accounting Fraud at HealthSouth).

This review will address several issues associated with the legal, business, and ethics related to the case. First, it will address the legality of the case by reviewing the definition and analysis of General Investment (GI) as a holder in due course. Next, this review will analyze the business effects

Mr. McDonald failed to document seven separate important factors that should have been included in the audit. He also did not obtain sufficient competent evidential matter to support the opinion on the financial statements with respect to the certain audit areas. Mr. McDonalds report was not modified, nor was there justification for departures from generally accepted accounting principles for the Fund’s financial statements inappropriately recognizing a benefit obligation without actual medical claims to support the obligation. Mr. McDonald did not obtain written representations from Fund management for all periods covered by the auditor’s report. The report that he provided did not comply with generally accepted auditing standards in that the report did not include a statement that the financial statements are in conformity with generally accepted

It is a trust which helps investors to achieve their investment goals through the way of funds.

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

At the time the fraud existed, internal controls were almost non-existent. The management team employed a number of improper accounting practices that did not comply with GAAP. As stated earlier, CEO Dean Buntrock not only allowed internal controls to be bypassed, he encouraged them to be ignored and shaped accounting policy with the sole purpose of making the targeted earnings numbers every year. The auditing firm, Arthur Andersen, LLP, was also shown to have complicity. The partners at Andersen knew that the company’s policies were not compliant so they provided Waste Management with proposed adjusting entries to their books. Waste Management refused to make the adjustments so Andersen had Waste Management sign off on a list of 32 steps the company must do to change its practices. The document legally constituted an agreement among the two parties and clearly shows that Andersen was aware of fraud that Waste Management had covered up in the past. Furthermore, Andersen did not stand up to the company and continued to

To make matters worse, when Andersen found problems in the financial statements, they didn’t make corrections due to a conflict of interest. The concern was that if Andersen brought these problems to light, Enron would walk away and cost Andersen millions of dollars in the long run. Andersen contemplated dropping Enron as a client, but did not follow through with it. Because the audit and consulting was done at the same firm, it clouded Andersen’s judgment. Andersen employees in Houston began shredding documents and therefore brought obstruction of justice charges that destroyed the firm.