Phar Mor Case Summary

In this case, based on the evidence which was given by the prosecutors, the judge was given the choice to find khan guilty of murder or manslaughter. The judge found him guilty and charged him with 1 count of murder and 2 counts of manslaughter. (Louise Hall, 2016)

Art Beaumont, the newly hired president of MediSys Corp, created a core team in August 2008 in order to accelerate the IntensCare project. Team consisted technically competent employee in six areas: research and development, engineering, software design, production, marketing and regulatory affairs. Jack Fogel, a senior production manager was assigned the project leader. IntensCare project was very important to the success of Medisys but the team had very tight schedule. However, differences started to emerge soon after which obfuscated the future of IntensCare project.

With different industry definitions and viewpoints, fraud can be a tough issue for audit committee members to grasp for oversight purposes. The legal obligations of audit committee members have intensified because their standard duty of care and loyalty to the entity has increased in light of management fraud activities.

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

Fraudulent financial reporting is one form of corporate corruption and may involve the manipulation of the documents used to record accounting transactions, the misrepresentation of accounting events or transactions, or the intentional misapplication of Generally Accepted Accounting Principles (GAAP) (Crumbley, Heitger, and Smith, 2013). Examples of fraudulent schemes befitting of this category abound and usually involve financial statement items that have been misclassified, omitted, overstated, undervalued, or prematurely recognized. One case involving CEO Bill Smith of Moonstay

2 Managing fraud risk: The audit committee perspective Fraud in a fi nancial statement audit

Phar-Mor, Inc. applied a variety of different fraudulent reporting techniques to "cook the books" and commit one of the biggest corporate frauds in American history. A number of things were done to cover up the massive losses the company was taking including issuing fake invoices for merchandise purchases, making fake journal entries in order to increase inventory and decrease cost of sales, recognizing inventory purchases but then not accruing the corresponding liability, and over-counting merchandise.

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

By reviewing SOX’s sections it was noted there are four sections that could address the aspects of the fraudulent activities at Phar-Mor. It’s very complicated to precise the fraud would be successfully prevented in this case since it was perpetuated at a very high level thereby there is a great chance the executives would have found a way to hide it. In this case as the fraud was perpetrated at the top executive’s level, SOX probably would prevent the involvement of some other employees in the scheme, however the fraud activities would have occurred whether or not SOX was in place at the time. Nevertheless, it is indisputable that SOX could have prevented the scandal.

Phar-Mor was known as one of the major discount chain retailers in the late 1980’s - early 1990’s. It was founded by Mickey Monus, a gambler in nature, who with the help of senior management was “cooking the books” for years to cover up his loses. The reason why senior management agreed to do this fraud is the belief in unique ability of their leader to fix everything later on. This case is known as one of the biggest accounting frauds in the corporate history of the U.S. This paper will analyze who was affected by this fraud, the motives behind it and what systems of control failed to prevent it.

Phar-Mor Inc. fell prey to greed from the top. Unfortunately, the auditing firm assisted the organization with the conspiracy to defraud the users of financial reporting, the government, and the stakeholders. The chief officers used the funds for personal usage and appropriated funds to functions that were not related to the organization business. The financial statements were riddled with material misstatements and fraud acts of theft were blatant. For example, the senior financial officers including the CEO grossly over stated inventory to hide losses.

With the avalanche of accounting scandals that have rocked the public, people tend to have increasingly high expectation that auditors are accountable for detecting all frauds, while the standards require auditors to provide reasonable, but not absolute, assurance. The purpose of the report is to discuss the accountability of auditors in detecting fraud by analysing a $16.9 million fraud of Otago District Health Board (ODHB) perpetrated by Swann and Harford from 2000 to 2006. The report will explain the event, the fraud, the stakeholders, the role of auditors and the current situation.

A number of financial statement frauds went undetected from auditors in past and attracted a high profile attention. The businessmen add fake assets or transfer the assets of companies to their personal assets and result in accounting scandals when the affected companies are bankrupted or are even close of bankruptcy. Just to mention a few names, accounting scandals of Enron, AOL Time Warner and Xerox are among the hottest accounting scandals of the century. This means that despite presence of professional auditors accounting scandals happen and there is a need to learn from the mistakes of the auditors who overlooked these activities. In this report the case study of Xerox is analyzed in detail to highlight violations of accounting principles and present an example from which lessons can be learnt for the future.

There was a sudden and unexpected collapse of Enron Corp. it was the first in a series of

The culture at Satyam, especially dominated by the board, represented an unethical culture. Satyam was brought to its knee due to tunneling‘effect unlike Enron, which sank due to agency ‘problem. All kind of frauds have proven that there is a need for good conduct based on strong ethics. The debacle of Satyam raised a debate about the role of CEO in driving an organization to the heights of success and its relationship with the board members and ore committees. The fraud at Satyam brought to the light the role of CG in influencing the protocols related to the working of audit committee and duties of board members (Niazi, and Ali, 2015). The government of India took very quick actions to protect the interest of the investors of Satyam, the nation’s image across the world and, safeguard the credibility of India. Moreover, Satyam fraud has forced the government to re‐write the CG rules and tightened the norms for auditors and accountants (Bhasin, 2013b). The Indian affiliate of PwC ―routinely failed to follow the most basic audit procedures. The SEC and the PCAOB fined the affiliate, PwC India, $7.5 million in what was described as the largest American penalty ever against a foreign accounting firm (Norris, 2011). According to Mr. Chopra, President (ICAI), ―The Satyam fraud was not an auditing or accounting failure, but one of CG. This apex body had found the two PwC auditors prima-facie‘guilty of professional misconduct. The CBI, which investigated the Satyam fraud case, also charged the two auditors with complicity in the commission of the fraud by consciously overlooking the accounting irregularities. The Satyam fraud, finally, had to end and the implications were having far reaching consequences. With all the 10-people involved in the multi-crore accounting fraud found guilty of