Friday, May 22, 2020

Phar Mor Case - 8496 Words

~ Case 6 Phar-Mor, Inc.: Accounting Fraud, Litigation, and Auditor Liability Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt LEARNING OBJECTIVES After completing and discussing this case, you should be able to . . Identify factors contributing to an environment conducive to accounting fraud . Understand what factors may inappropriately influence the client-auditor relationship and auditor independence Understand auditor legal liability issues related to suits brought by plaintiffs under both statutory and COmmonlaw INTRODUCTION In December 1995, the flamboyant entrepreneur Michael Mickey Monus, formerly president and chief operating officer (COO) of the deep-discount retail chain PharMor, Inc., was†¦show more content†¦Phar-Mors prices were so low that competitors wondered how Phar-Mor could do it. Monus strategy was to underse11Wal-Mart in each market where the two retailers directly competed. Unfortunately, Phar-Mors prices were so low that Phar-Mor began losing money. Unwi11ingto a11owthese shortfa11sto damage Phar-Mors appearance of success, Monus and his team began to engage in creative accounting so that PharMor never reported these losses in its financial statements. Federal fraud examiners discerned later that 1987 was the last year Phar-Mor actua11ymade a profit. Investors, relying upon these erroneous financial statements, saw Phar-Mor as an opportunity to cash in on the retailing craze. Among the big investors were Westinghouse Credit Corp., Sears Roebuck Co., ma11developer Edward J. de Bartolo, and the prestigious Lazard Freres Co. Corporate Partners Investment Fund. Prosecutors say banks and investors put $1.14 biUion into Phar-Mor based on the phony records. The fraud was ultimately uncovered when a travel agent received a Phar-Mor check signed by Monus paying for expenses that were unrelated to Phar-Mor. The agent showed the check to her landlord, who happened to be a Phar-Mor investor, IUnless otherwise noted, the facts and statements included in this case are based on actual trial transcripts. Case 6 - Phar-Mor, Inc.: Accounting Fraud, Litigation, and Auditor Liability and he contacted Phar-Mors chiefShow MoreRelatedPhar-Mor Case1536 Words   |  7 PagesAssignment Week 1 The Case of Phar-Mor Inc Devry University ACCT 525-15768 January 12, 2014 Abstract The Sarbanes-Oxley Act of 2002 was implemented with the sole purpose of assuring the investors in the financial reporting system. One example is a case such as Phar-Mor which fabricated their inventory in most of their retail stores in order to conceal a massive fraud by the leading executives. Or the Waste Management scandal which did things such as capitalizing items which should haveRead MoreThe Case Of Phar Mor Inc.1433 Words   |  6 PagesThe Case of Phar-Mor Inc. 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This case is known as one of the biggest accounting frauds in the corporate history of the U.S. This paper will analyzeRead MoreCase 4.6. Phar-Mor Inc.8093 Words   |  33 Pages|Case 4.6 | |Instructional Notes | | | |Phar-Mor, Inc.: Read MoreCase Study : Phar Mor s Assets787 Words   |  4 PagesExecutives misappropriated Phar-Mor’s assets, directing over $10 million to Monus’s now defunct World Basketball League (WBL). With the league failing and fan attendance dwindling, Monus was forced to use Phar-Mor funds to cover numerous WBL expenses. When a Phar-Mor check was sent directly to a WBL vendor, the fraud began to unravel. CEO David Shapira announced the fraud in August 1992. Phar-Mor maintained 91 related parties, as identified after the fraud. 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Unfortunately, the auditing firm assisted the organization with the conspiracy to defraud the users of financial reporting, the government, and the stakeholders. The chief officers used the funds for personal usage and appropriated funds to functions that were not related to the organization business. The financial statementsRead MoreEssay about Phar Mor Inc Case Study1184 Words   |  5 PagesSean Russi The Case of Phar-Mor Inc ACCT-525 October 31, 2012 Case Summary The case of Phar-Mor Inc was one of the biggest pre-Enron frauds that have been uncovered. Phar-Mor Inc established in 1982 Phar-Mor was a small little known discount drugstore. Phar-Mor became well known for offering medications at a 25-40% discount rate compared to your normal pharmacy store prices. Phar-Mor’s first six years of existence seemingly wereRead MorePhar Mor813 Words   |  4 PagesACCT 4304, Fall 2015 Audit case Read the attached audit case and answer all the questions that follow. A total of 90 points are available for the actual responses to the questions and 10 points are available for presentation, clarity and grammar. Total points for the assignment are 100. Note: Answer the questions as comprehensively as possible. Reference to Auditing Standards, your textbook, and other relevant authoritative sources is expected where appropriate. Even where some of the questionsRead MoreCase Analysis : The Fraud1004 Words   |  5 PagesFinn eliminated the internal audit function to hide the payroll irregularities. †¢ Collusion among upper management and employees to commit fraud †¢ The Phar Mor had the knowledge of the audit procedures and objectives, as one of the auditors has worked for Coopers as well as the Phar Mor. †¢ The complex web of related parties involved with the Phar Mor made it difficult to detect the improprieties and fraudulent activities. AICPA’s the most decisive step to combat fraud and puts greater emphasis on professional

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