Accounting Fraud

  • Accounting - Even if the government doesn't know how to regulate accounting, many observers think that...
  • Internal Control Programs - cash management, accurate accounting for cash transactions, help maximize efficiency,...
  • Lesson In Regulation - has. For example, the SEC regulates the accounting reports submitted by listed companies....
  • The Story - prosecuted. Those who aid such fraud will meet the same fate," he said. Former Enron...
  • Accounting Ethics - of accountants and professional life. Accountants have viewed independence on three ethical...

Submitted by freefortermpapers on 06/24/2008 03:00 PM

  • Category: Business
  • Words: 416
  • Pages: 2
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  • Popularity Rank: 757


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Accounting Fraud

Revising this chapter was not a pleasant task, because of what's happened since the previous edition of this book was released in 2001. If you had asked me at that time to forecast the ensuing years, I would never in my wildest dreams have predicted what actually took place. It's a very sad tale to tell.

I majored in accounting in college and, upon graduation, went to work for one of the national CPA firms. I took great pride in my profession. I went on to get my PhD in accounting, and I taught at the University of California in Berkeley and at the University of Colorado in Boulder for 40 years before retiring. I regularly taught the auditing course, which introduces students to the purpose and conduct of audits of financial statements by independent CPAs.

I always stressed that an auditor is duty-bound to exercise professional skepticism, which means that the auditor should challenge the accounting methods and reporting practices of the client in order to make sure that its financial statements conform with accounting standards and are not misleading — in short, that the financial statements are fairly presented. Indeed, the words "fairly presented" are the exact words used in the auditor's report.

Key Concept To be a good auditor, you have to know your stuff, but this isn't enough. You should be tough as nails on the accounting methods of your client. Your job is to be the agent of the shareowners and other users of the business's financial report. The auditor should never be a weak-kneed, look-the-other-way, let's-go-along-with-management reviewer of a business's accounting methods and financial reporting practices. Auditors, in theory, should be tough-minded enforcers of accounting and financial reporting standards. Obviously, this theory has holes in it.


The number of well-known companies that engaged in accounting fraud in recent years that was not discovered by their CPA auditors is...

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