Audits

Another interview with admitted inside-trader from KPMG

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Scott London has given another interview, this time with the Agora Hills Acorn – Community leader’s fall from grace stemmed from insider trading.

If you are really interested in the former KPMG partner’s story, you’ll want to check out the article.

Here’s a few interesting tidbits with my observations:

The insider work ran for about 16 months when Mr. London and his golf buddy, Bryan Shaw, mutually decided to end it, according to the article.

The article expands the developing narrative that passing on insider info started slowly and just grew over time. …

Another interview with admitted inside-trader from KPMGRead More »

Another interview with admitted inside-trader from KPMG Read More »

Suspended sentences for senior Olympus officials in $1.7B fraud

1 Comment / Audits, Fraud /

Suspended sentences all around.

The Bloomberg report, Ex-Olympus Chairman Gets Suspended Sentence for Fraud, says the three senior staff charged a year ago received suspended sentences after their guilty pleas.

The individuals and their sentences: …

Suspended sentences for senior Olympus officials in $1.7B fraudRead More »

Suspended sentences for senior Olympus officials in $1.7B fraud Read More »

An additional consequence of insider trading – knowing your name is in every newspaper in the country – Former KPMG partner enters guilty plea – #9

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As expected, former regional audit PIC Scott London entered a guilty plea on Monday to one count of securities fraud. Sentencing is set for October 21, 2013.

In the 90 minutes since I saw the first report, over 30 hits show up on an internet search. I’m sure there will be many dozens more in the next few hours.

Three initial articles I saw:

An additional consequence of insider trading – knowing your name is in every newspaper in the country – Former KPMG partner enters guilty plea – #9 Read More »

All the Enron accounting was approved by the attorneys and the auditors and the board. Everything was perfectly legit. Until indictments were issued.

1 Comment / Audits, Fraud /

In a speech that should give all auditors pause, Andrew Fastow, former CFO of Enron, tells us that all the off-balance sheet transactions were reviewed and approved in advance by everybody.

Enron was one of the biggest in the host of business frauds after the turn of the century.

Half of Enron’s assets were off-balance sheet. According to the article, Former Enron CFO Andrew Fastow Confronts the Fraud Examiners, Mr. Fastow says those deals were intended to deceive:

Fastow admitted that his role was engaging in structured finance transactions that intentionally created a false appearance for Enron. 

The goal was to create misleading financial statements.

Did he violate the accounting rules?

No.

Did he break specific laws?

No.

The transactions were reviewed and approved, yet still fraudulent

…

All the Enron accounting was approved by the attorneys and the auditors and the board. Everything was perfectly legit. Until indictments were issued.Read More »

All the Enron accounting was approved by the attorneys and the auditors and the board. Everything was perfectly legit. Until indictments were issued. Read More »

If we remember why it’s difficult for audits to detect fraud, we have better odds of doing so

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Tracy Coenen lists 9 reasons for “Escaping Detection: Why Auditors Do Not Find Fraud”.

If we understand why audits are a poor tool for detecting fraudulent financials, we can improve our chances of finding material frauds.

Check out her post, it will be worth your time.

Here are a few thoughts expanding on her list. …

If we remember why it’s difficult for audits to detect fraud, we have better odds of doing soRead More »

If we remember why it’s difficult for audits to detect fraud, we have better odds of doing so Read More »

Verify state exempt status – You can look up the status of an organization with the California Franchise Tax Board

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(Cross-post from my other blog, Nonprofit update.)

This is cool. The Franchise Tax Board has an online feature call the Entity Status Letter which allows you to quickly find whether an NPO is exempt with the state of California.

You can go to the Self Serve Entity Status Letter – Entity Search page. If the link breaks, just search “entity status letter” at the FTB website.

This will also work for a for-profit business.

…

Verify state exempt status – You can look up the status of an organization with the California Franchise Tax BoardRead More »

Verify state exempt status – You can look up the status of an organization with the California Franchise Tax Board Read More »

Live example of a fraud fiasco

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“Going to meet your Maker with the fresh scent of theft on your hands is not a good way to go…”

is how Charles Hall starts his story of a long ago fraud – Stealing While Dying.

We’ve all seen the situation where the bookkeeper does the main bookkeeping, receives the bank statements, reconciles the accounts, and is an authorized check signer.

In this situation, the most-honest-and-nicest-person-you’ll-ever-meet bookkeeper starting stealing lots of money when she became gravely ill.

Check out the full story. …

Live example of a fraud fiascoRead More »

Live example of a fraud fiasco Read More »

Former KPMG partner in court for arraignment and procedural issues; on camera interview with CNBC

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Scott London was in court today on procedural matters regarding the criminal complaint alleging insider trading.

CNBC has a video interview with him.

The Wall Street Journal and Los Angeles Times have more details.

A few tidbits from the televised interview:

…

Former KPMG partner in court for arraignment and procedural issues; on camera interview with CNBCRead More »

Former KPMG partner in court for arraignment and procedural issues; on camera interview with CNBC Read More »

Price cut on my newest e-book, “Tragedy of Fraud”

Leave a Comment / Accounting, Audits, Books you might enjoy, Fraud /

Price reduced to only $0.99, now available here.

“Tragedy of Fraud – The Ripple Effects from Fraud and the Wages Earned” describes the tragic consequences from fraud.

There are ripple effects that spread out to harm innocent bystanders. The perpetrator draws a wide range of well-deserved wages that will be paid in full.

The book looks at two fraud incidents to learn what happens after a fraud is discovered. One took place in a local megachurch and the other in the mayor’s office of a small city.

This book is a compilation of blogs posts that have been previously published at Nonprofit Update and Attestation Update. The posts have been edited slightly and reorganized for easier reading.

Major sections of the book:                        

  • Tragedy of Fraud – The Ripple Effects from the Embezzlement Fraud in a Local Church.
  • Wages of Fraud – Consequences from the Corruption Fraud in a Mayor’s Office.
  • Why is it Difficult to Find Fraud? – The lack of documentation inside an organization makes it even more difficult to identify a fraud scheme.
  • The Fraud Triangle – A discussion of the three sides of a fraud triangle. That’s the idea that three components need to be present for a fraud to take place – opportunity, motivation, and rationalization. Great danger is in play when all three factors are present.

The other book I have available at Amazon is Once Upon Internal Control.

Price cut on my newest e-book, “Tragedy of Fraud” Read More »

Why auditing is not like watching a movie

1 Comment / Audits, Fraud /

I walk into the room while my wife is watching a movie on Lifetime Movie Network™.

I watch for 30 or 60 seconds.

I guess who is the bad guy/bad gal.

I’m usually right.

How is it possible to guess correctly most of the time? Well, let’s see…

I know there’s normally a bad guy on the network’s movies. There’s usually a small cast of characters and the bad gal gets lots of screen time. There’s usually ominous music playing when the bad guy is engaged in bad-guy-stuff.

How does that help CPAs? 

…

Why auditing is not like watching a movieRead More »

Why auditing is not like watching a movie Read More »

More good stuff for auditors – 6-10-13

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There are so many good accounting articles that I would like to discuss in a full post. Alas, time does not permit.

Thus I will start putting up a list of good stuff that I’d like talk about but only have time to recommend with a sentence. Focus will be on articles I think would help other CPAs.

Here’s my first list:

…

More good stuff for auditors – 6-10-13Read More »

More good stuff for auditors – 6-10-13 Read More »

2 creative questions for risk assessment in an audit

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Good questions help understand what your client considers to be their biggest risks.

Charles Hall provides two great questions to ask in his post Missing Critical Clues in the Audit Process:

Think about these as ways to get your client talking about the risks in their organization: …

2 creative questions for risk assessment in an auditRead More »

2 creative questions for risk assessment in an audit Read More »

Former KPMG partner enters plea agreement

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Former KPMG regional audit PIC Scott London entered a plea agreement on Tuesday according to multiple media sources.

The agreement says he passed information to his golf buddy at least 14 times.

The Encino Patch article linked below says he will plead guilty to one felony charge of securities fraud through insider trading with potential prison term of 20 years. Multiple other reports list that as the potential penalty. The Week adds that the potential fine is up to $5M.

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Former KPMG partner enters plea agreementRead More »

Former KPMG partner enters plea agreement Read More »

Bryan Shaw pleads guilty for conspiracy in KPMG insider trading fiasco because he’s guilty. Oh, and a really small additional consequence for Mr. London – #8

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The tippee in the KPMG insider trading case, Bryan Shaw, entered a guilty plea Monday on one count.

Check out the identical headlines (no, they aren’t from the same reporter or picked up on from a wire service):

…

Bryan Shaw pleads guilty for conspiracy in KPMG insider trading fiasco because he’s guilty. Oh, and a really small additional consequence for Mr. London – #8Read More »

Bryan Shaw pleads guilty for conspiracy in KPMG insider trading fiasco because he’s guilty. Oh, and a really small additional consequence for Mr. London – #8 Read More »