ZZZZ Best Company Fraud Case Study 1) At an early age‚ Barry Minkow was introduced to the carpet cleaning industry by his mother who worked part time as a telephone solicitor for a small carpet cleaning company. This insight of the industry allowed Minkow to understand that the carpet cleaning industry was one which had very few barriers to entry‚ no licensing requirements‚ and required only a small amount of capital to enter. Also‚ because of these few barriers to entry‚ the industry has historically
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Case 1.9 Question 1: Ernst & Whinney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for the three months ended July 31‚ 1986. How does a review differ from an audit‚ particularly in terms of the level of assurance implied by the auditor’s report? Answer: A review report does not assess the control risk of a company‚ which means Ernst & Whinney could have not gotten the proper risk that a material misstatement
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Case 1.9 Question 1: Ernst & Whinney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for the three months ended July 31‚ 1986. How does a review differ from an audit‚ particularly in terms of the level of assurance implied by the auditor’s report? Answer: A review report does not assess the control risk of a company‚ which means Ernst & Whinney could have not gotten the proper risk that a material misstatement
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By fabricating over 20‚000 documents Barry Minkow‚ Mark Morze‚ and a few other insiders were able to fool investors‚ auditors‚ banks‚ and whoever else that was interested in the success of a small carpet cleaning company that made it big. Like all frauds they eventually get blown wide open. In this case it was a young female journalist writing a filler piece on Barry Minkow’s success. When tying the story up she decided to make a call to the city just to verify their contractor’s license number‚
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Barry Minkow – Misrepresentation and Ponzi in 1987 Establishment of ZZZZ Best Company When he was a sophomore in high school‚ Barry Minkow founded a carpet cleaning company - ZZZZ Best Company in his parents’ garage. At that time‚ the carpet cleaning industry has few entry barriers and all Minkow needed was a small amount of start-up capital. However‚ he soon found out that his firm was actually tough to survive in the industry as the ease of entry means fierce competition. The young man encountered
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Additional Cases for the Course The case readings have been developed solely as a basis for class discussion. The case readings are not intended to serve as a source of primary data or as an illustration of effective or ineffective auditing. Reprinted by permission from Jay C. Thibodeau and Deborah Freier. Copyright © Jay C. Thibodeau and Deborah Freier; all rights reserved. 1••• ( Case 61 ® Enron Enrori’s First Few Years hi~ 1985 Enron had assets along the three major stages of the supply
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employed by Ernst & Whinney during the 1981USSC audit‚ might have detected the overstatement of the leased and loaned assets account that resulted from the improper accounting for assets retirements. There are several audit procedures that‚ if employed by Ernst & Whinney during the 1981 USSC audit‚ might have detected the overstatement of the leased and loaned assets account that resulted from the improper accounting for assets retirements. First of all‚ Ernst & Whinney overlooked
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out significant matters of the financial statements but does not provide assurance of their accuracy. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any misstatements on the financial statements. Ernst & Whinney never questioned the internal control‚ reviewed contractual agreements or made comparison of the previous statements. If they had done any of the above‚ they would have revealed a glitch in the system. In addition‚ the review does not provide
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has about the client that could be relevant to the successor effectively doing his job. 5. Yes‚ the confidentiality agreement improperly limited the scope of the audit because it did not allow Ernst & Whinney to thoroughly investigate the restoration sight. It effectively blocked Ernst & Whinney from authenticating the restoration sight‚ or discovering that the restoration sight was completely fake. Confidentiality concerns may be ok in the event of maintaining some sort of competitive
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Case Study: ZZZZ Best Company‚ Inc. 1. Ernst & Whinney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for three months ended July 31‚ 1986. How does a review differ from an audit particularly in terms of the level of assurance implied by auditor’s report? Although a review is similar to an audit‚ it differs from an audit in its limited scope and assurances. The objective of an audit is to provide a reasonable
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