Financial Accounting Blog

Wednesday, January 14, 2004 gives a report on the evolution of accounting fraud and the changing technology used to fool auditors.
Back in the 1960's the fraudulent growth story destined to get the most attention was that of Equity Funding. It was a Wall Street darling with a concept that seemed ever so clever: It sold mutual fund shares to investors, and then allowed them to borrow against the value of the funds to purchase life insurance.......By the early 1980's, it was ZZZZ Best that showed how easy fraud could be. That carpet cleaning company was started by a 16-year old who wound up with stock worth more than $100 million after his company went public.........Then a copier was used to produce documents good enough to fool the trusting auditors. They sent requests for confirmation to the addresses listed on the statements...........Is it too much to ask that the auditing firms come up with a foolproof way to assure that bank accounts are real?