Fabricating your audit report Friday, January 26, 2007
You open a set of accounts and somewhere in it is an audit report signed by an audit firm. Or was it?
Have you ever contacted an audit firm to confirm that they actually audited the company and signed off the audit? Me neither. How likely is it that audit firms themselves would spot someone passing off an audit report? The large firms have tens of thousands of clients, so it's reasonably unlikely anyone inside those firms would easily spot that a firm wasn't a client unless it was of more than passing interest.
I raise this simply because this "loophole" is exactly what Renaisance Asset Management, based in Georgia USA exploited. They had filed financial reports including an audit report from Grant Thornton. Renaisance had never been audited by Grant Thornton or indeed any firm. The fabrication only came to light by chance and not through the existence of any regulatory/ government/ accountancy body structural controls to detect such matters (which don't appear to exist).
Makes you wonder.
Labels: Accounting, Hedge Funds
posted by John Wilson @ 10:21 AM Permanent Link
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2 Comments:
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At 10:39 AM,
duncanwil said...
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Well, some audit reports are genuine and worth even less aren't they!
Nice story that I am sure I'll use one day!
Duncan -
At 4:42 PM,
John Wilson said...
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I'm dining out on it!
