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1. Citing directly to the AICPA Code of Conduct and using the rule numbers, etc., as appropriate, identify and describe the ethics violations detailed in the article. (Assume all the parties involved were bound by the Code of Conduct.)
2. What effects did the violations and choices made have on the public, investors and third-parties?
3. Put yourself in the shoes of a compliance officer uninvolved in the fraud or other schemes and you are responsible for making changes to the organizations implicated. What would you do differently to uphold and reinforce the Code of Conduct and otherwise protect the public?
10/4/21, 3:04 PM
Jury Finds Ernst & Young Liable for Faulty Madoff Audits
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Jury Finds Ernst & Young Liable for Faulty Madoff Audits
By Elizabeth Amon and Sophia Pearson (https://www.insurancejournal.com/author/sophia-pearson/) | November 16, 2015
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subject=Jury%20Finds%20Ernst%20%26%23038%3B%20Young%20Liable%20for%20Faulty%20Madoff%20Audits&body=Jury%20Finds%20Ernst%20%26%2303
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Article (https://www.insurancejournal.com/news/national/2015/11/16/389026.htm)
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Ernst & Young LLP was found liable by a jury for its failure to vet financial audits backed by con man Bernie Madoff’s accountant in the first trial of
FutureSelect Portfolio Management Inc., which sued Ernst & Young in 2010 over faulty audits of a Madoff-linked feeder fund, is entitled to recoup
million in damages it awarded.
Ernst & Young audited Rye Funds, which were managed by Tremont Group Holdings Inc. The accounting firm audited Rye from 2000 to 2003 and
The company sued Ernst & Young along with Tremont and its parent Oppenheimer Acquisition Corp., which later reached confidential settlements
FutureSelect accused the accounting firm of failing to perform adequate audit procedures to test the existence of assets on Rye’s financial statem
Ernst & Young allegedly relied on audit reports done by Madoff’s accounting firm Friehling & Horowitz, which was located at the time in a strip ma
said in closing arguments. Had it done so it would have found out that the accountant wasn’t vetted to do audits as required by industry standards
Ernst & Young has stood by its auditing decisions arguing that no one could have detected Madoff’s sophisticated fraud. James Bennett, a lawyer
Tremont was the second-biggest feeder into Madoff’s multibillion-dollar fraud after Fairfield Greenwich Group. Tremont and the liquidator of Mado
that deal and pursued its own case.
Madoff is serving a 150-year prison term for stealing billions of dollars from thousands of investors. David Friehling, Madoff’s accountant for more
The case is FutureSelect Portfolio Management Inc. v. Ernst & Young, 10-2-30732-0, Superior Court of the State of Washington for King County (
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Categories: National News (https://www.insurancejournal.com/news/national/) Topics: accountants liability (https://www.insurancejournal.com/topics/accountants-liability/), Bernard Madoff (http
FutureSelect Portfolio Management Inc. v. Ernst & Young (https://www.insurancejournal.com/topics/futureselect-portfolio-management-inc-v-ernst-young/)
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Jury Finds Ernst & Young Liable for Faulty Madoff Audits
California Enacts Nation’s First Law Regulating Warehouse Labor Quotas
By Akriti Sharma and Kanishka Singh (https://www.insurancejournal.com/author/kanishka-singh/) | October 4, 2021
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California Governor Gavin Newsom last month signed a bill that limits warehouse employers like Amazon.com Inc. from s
The new provisions require all companies using warehouse labor to disclose productivity quotas to employees and government agencies and bar
The California State Senate this month approved the bill in a 26-11 vote.
“We cannot allow corporations to put profit over people,” Newsom said in a statement, signing the measure into law.
“The legislation ensures workers cannot be fired or retaliated against for failing to meet an unsafe quota.”
While Newsom’s office did not single out any company in the statement, the New York Times reported that the bill was written partly in response t
The rate at which Amazon workers suffer serious injuries was nearly double that of the rest of the warehousing industry last year, the newspaper
Amazon did not immediately respond to a request for comment.
“The hardworking warehouse employees who have helped sustain us during these unprecedented times should not have to risk injury or face pun
The California Retailers Association expressed disappointment that Newsom signed the bill, saying it “will exacerbate our current supply chain iss
(Reporting by Singh and Akriti in Bengaluru; Editing by Clarence Fernandez, Robert Birsel)
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Watchdog berates PwC over ‘misleading’ BHS accounts | BHS | The Guardian
News Opinion Sport Culture Lifestyle
BHS
This article is more than 3 years old
Watchdog berates PwC over ‘misleading’ BHS accounts
Sean Farrell
Wed 15 Aug 2018 09.15 EDT
BHS’s accounts were misleading and featured unrealistic forecasts before Sir Philip
Green sold the now collapsed department store chain, according to a report into the
role of the retailer’s auditor, PwC.
The Financial Reporting Council (FRC) said BHS’s 2014 accounts were “incomplete,
inaccurate and misleading” because they said Taveta, BHS’s owner, would provide it
with financial support. But Taveta’s backing only applied while it owned BHS. When
the audit was signed in March 2015, BHS was days away from being sold for £1 in a deal
that eventually led to its collapse.
https://www.theguardian.com/business/2018/aug/15/watchdog-berates-pwc-misleading-bhs-accounts
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10/4/21, 3:01 PM
Watchdog berates PwC over ‘misleading’ BHS accounts | BHS | The Guardian
The watchdog’s report, which was changed after Green objected to its contents, shines
a light on BHS’s accounting and the failure of PwC and the firm’s senior audit partner
Steve Denison to scrutinise the business. The FRC fined PwC a record £6.5m in June
and banned Denison from audit work for 15 years. Denison was also fined a record
£325,000.
The FRC said: “The respondents [PwC and Denison] gave no consideration to how
these matters may have impacted BHS’ ability to continue as a going concern. They
failed to gather any audit evidence on which to conclude that the going concern
assumption was appropriate. Based on the audit evidence obtained, they should have
concluded that a material uncertainty existed about BHS Group and BHS’s ability to
continue as going concerns.”
The FRC said PwC, one of the big four accountants, and Denison failed to test many of
the assumptions made by the management of Taveta, Green’s retail empire, about BHS.
The assumptions included an estimate that BHS’s like-for-like sales would rise 6.7% in
2015 – even though its retail sales had fallen 2.6% between 2012 and 2014. BHS
management assumed the chain’s annual loss would shrink by £30m in 2015 from
£69m the previous year as margins expanded and sales rose.
“Such margin and sales growth were unsupported by audit evidence and should have
appeared to the respondents to be unrealistic and require further investigation,” the
FRC said.
Taveta sold BHS for £1 to the former bankrupt Dominic Chappell’s Retail Acquisitions
vehicle on 11 March 2015, two days after PwC signed off BHS’s accounts. The chain
collapsed in April 2016 with the loss of 11,000 jobs, leaving a £571m pension deficit.
Taveta tried to block publication of the report, which it said contained defamatory
statements based on “a partial and inaccurate view of the facts”. The judge refused its
request for an injunction but said the regulator should consider whether publishing the
report in its existing form was lawful. The final report did not criticise Green or name
any of his management team.
Responding to its publication, Taveta said the report was about PwC and Denison and
that the FRC had stated no one else was criticised. But it said that, despite revisions
since the court case, the report still gave a potentially misleading picture of BHS’s
affairs. The FRC failed to reflect the post-sale support Taveta provided to BHS and
Taveta’s directors “reserve all their rights in respect of the report”, it said.
https://www.theguardian.com/business/2018/aug/15/watchdog-berates-pwc-misleading-bhs-accounts
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10/4/21, 3:01 PM
Watchdog berates PwC over ‘misleading’ BHS accounts | BHS | The Guardian
A screengrab of Steve Denison giving evidence to the House of Commons business committee in 2016. Photograph: PA
The FRC criticised Denison for being too close to Taveta’s management. It said Denison
and PwC failed to guard against a conflict of interest caused by the large amount of
non-audit work the firm carried out for Taveta.
In 2014 Taveta paid PwC £355,000 in fees for audit work, which is essential for holding
companies to account and ensuring their books are in order. In the same year PwC
charged Taveta £3.3m for other services, which “risked inappropriately influencing the
respondents’ judgment or behaviour”, the FRC said.
In 2014 Denison said: “I continue to receive great feedback from the senior people at
my clients (Sir Philip Green and Paul Budge at Arcadia) … As a result, the incidence of
them asking the other firms for help or advice is very limited.”
Between 1 January and 9 March 2015 Denison recorded only two hours of work for
auditing Taveta’s financial statements, including BHS. An accountant with a year’s
post-qualification experience, referred to as B, recorded 29.25 hours and other more
junior members of the team recorded 114.6 hours.
B did not know BHS was being sold until around the time the accounts were signed off.
The FRC said the time recorded by Denison was inadequate.
https://www.theguardian.com/business/2018/aug/15/watchdog-berates-pwc-misleading-bhs-accounts
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10/4/21, 3:01 PM
The report
describes the most
incredible example
of complacent audit
rubber-stamping
one could fear to
imagine
Frank Field MP
Watchdog berates PwC over ‘misleading’ BHS accounts | BHS | The Guardian
Frank Field MP, the chairman of the work and pensions
select committee, who has lobbied for publication of the
report, described its contents as devastating. He added:
“The report describes the most incredible example of
complacent audit rubber-stamping one could fear to
imagine.”
He added: “The FRC has accepted Taveta’s arguments that
they were simply ‘very optimistic’ about BHS’s prospects as
a going concern. That sounds like a euphemism of the most
preposterous proportions. If Sir Philip and his fellow
directors really do believe they had proper evidence that BHS was a going concern,
then surely they will be happy to put that evidence in the public domain so that BHS
employees, pensioners and creditors can judge for themselves.”
Field has written to Green asking him to provide the basis for the “going concern”
assessment and details of Taveta’s “management assumptions” – which are the subject
of much of the FRC report’s criticisms.
PwC said: “We are sorry that our work fell well below the professional standards
expected of us and that we demand of ourselves. This is unacceptable and we agreed
the settlement recognising that it is important to learn the necessary lessons.
“Our audit methodology was not followed in this instance. We have taken steps to
bolster the supervision and review of our audits. We took swift action to enhance our
support and monitoring procedures. We have agreed with the FRC to extend these
further for an additional period. Whilst the failings did not contribute to the collapse of
BHS over one year later, they were serious and this is reflected in the Financial
Reporting Council settlement.”
https://www.theguardian.com/business/2018/aug/15/watchdog-berates-pwc-misleading-bhs-accounts
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