KPMG Fraud Case
KPMG United States- Oct. 17, 2015
1. Issuer O: “The Firm identified a fraud risk related to revenue. The Firm's testing of controls over revenue and accounts receivable, however, was insufficient. Specifically: With respect to one of the issuer's segments, which consisted of three business units, the Firm failed to identify and test any controls over revenue and accounts receivable for two of the business units, which, in combination, represented a significant portion of the issuer's total revenue and accounts receivable.”
2. The reason that I chose this to be the worst deficiency that KPMG had was because they failed to test any controls over revenue and A/R. KPMG seems to not learn from past mistakes and continues to assume that either management is always telling the truth, or that since controls are effective in one subsidiary they are good in all subsidiaries. In this case they tested the controls at …show more content…
Issuer I: “The Firm failed to perform sufficient procedures to test revenue and accounts receivable. Specifically, the Firm failed to perform any procedures to test whether the criteria were met for recognizing the recorded revenue. In addition, in performing tests of details of accounts receivable, the Firm selected a sample only from subsidiary ledgers that exceeded a certain threshold, and therefore a significant portion of accounts receivable was not subject to testing.”
2. I felt that this was the worst violation or deficiency committed by Ernst & Young. The reason is that they failed to perform any procedures about revenue recognition. They also did a horrible job of selecting a proper sample size for the confirmation of A/R. This seems like an extreme case of laziness on the part of Ernst & Young. The sample size taken was neither random, nor representative of the population. The most astonishing part of this was that they only tested a sample from the subsidiary ledgers and not the general
1. Issuer O: “The Firm identified a fraud risk related to revenue. The Firm's testing of controls over revenue and accounts receivable, however, was insufficient. Specifically: With respect to one of the issuer's segments, which consisted of three business units, the Firm failed to identify and test any controls over revenue and accounts receivable for two of the business units, which, in combination, represented a significant portion of the issuer's total revenue and accounts receivable.”
2. The reason that I chose this to be the worst deficiency that KPMG had was because they failed to test any controls over revenue and A/R. KPMG seems to not learn from past mistakes and continues to assume that either management is always telling the truth, or that since controls are effective in one subsidiary they are good in all subsidiaries. In this case they tested the controls at …show more content…
Issuer I: “The Firm failed to perform sufficient procedures to test revenue and accounts receivable. Specifically, the Firm failed to perform any procedures to test whether the criteria were met for recognizing the recorded revenue. In addition, in performing tests of details of accounts receivable, the Firm selected a sample only from subsidiary ledgers that exceeded a certain threshold, and therefore a significant portion of accounts receivable was not subject to testing.”
2. I felt that this was the worst violation or deficiency committed by Ernst & Young. The reason is that they failed to perform any procedures about revenue recognition. They also did a horrible job of selecting a proper sample size for the confirmation of A/R. This seems like an extreme case of laziness on the part of Ernst & Young. The sample size taken was neither random, nor representative of the population. The most astonishing part of this was that they only tested a sample from the subsidiary ledgers and not the general