To: Liz
As a former Big 8, 7, 6, 5, 4 accountant (10 years in tax) I find in interesting that Worldcom would blame its outside accountants. Today, in my present job, I was asked to sign a Management Representation Letter, which says in part that no member of executive management knows of or is involved in fraud related to the financial statements under review. This is a standard in todays accounting practices. Yes, it's CYA, but it's a damning statment against Worldcom and all other companies that have committed fraud. It's the inside people not the outside accountants. Anything can be hidden for a certain amount of time.
7 posted on
07/09/2002 7:02:37 PM PDT by
BamaBlue
To: BamaBlue
I was asked to sign a Management Representation Letter, which says in part that no member of executive management knows of or is involved in fraud related to the financial statements under review. This is a standard in todays accounting practices. Yes, it's CYA, but it's a damning statment against Worldcom and all other companies that have committed fraud. It's the inside people not the outside accountants. Anything can be hidden for a certain amount of time. Enron hid stuff offshore thru the machinations of its shady CFO Fastow. But in any case, SOP is for CEO's to sign off on the financial details. Apparently, these characters did so whether the details were true or not.
9 posted on
07/09/2002 7:08:03 PM PDT by
Liz
To: BamaBlue
In this case it's both. Obviously insiders initiated the fraud, but missing a $3.8 billion expense fraudulently dropped into the capex line is gross negligence on the part of the auditors. This was not a complex fraud which was carefully disguised by management. It's comparable to management taking a multi-billion dollar chunk of debt and moving it to paid-in-capital -- any first-year accounting student ought to catch it. When a senior accountant for a major firm, heading up an audit of a huge client, misses something of this magnitude and simplicity, it's because s/he is representing having done audit work which s/he simply did not do (and accepting payment for the work not done, to boot). This should be a criminal offense which lands accountants in the slammer.
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson