January 23, 2022

Accounting News Roundup: Inadequate Accounting and Financing a Business With Fraud | 05.25.17

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Inadequate accounting

Here’s a Financial Times story about KPMG’s resignation as the auditor of Lycamobile, a British telecom company, after three years. It’s a bit confusing, though, because the CFO of Lyca Group, Lycamobile’s parent, said the company terminated KPMG on April 24th. KPMG, however, claims it notified Lycamobile in November 2016 and again in March 2016 that it intended to resign.

After Lycamobile asked KPMG to defer its resignation on 21 April, according to KPMG, it received a letter from Lycamobile saying that KPMG was dismissed as auditors. As that would not be effective until Lycamobile’s general meeting, KPMG submitted its resignation anyway.

Uh, what? Aren’t the breakupper and the breakuppee roles pretty clear in most instances? Full disclosure: I used work at KPMG, but I’m inclined to believe their version of events, if only because they claimed to be “unable to determine whether adequate accounting records have been kept by the company.”

I imagine the conversation went something like this:

KPMG Partner: Cheerio. Could we take a look at your accounting records?

Lyca Controller: Sure, here you go. [hands over a single, printed spreadsheet]

KPMG Partner: Wait, is this it?

Lyca Controller: [Shrugs]

KPMG Partner: So you can’t tell me if this all the accounting records you have for the organisation?

Lyca Controller: [Shrugs, walks away]

KPMG Partner: Wanker.

My question now is, “Why did it take you three years to resign?”

“Resigning an audit is not a step we take lightly,” KPMG said. Still, three years is a long time to wait for a complete set of books, seemingly without any indication from the client that that complete set of books even exists.

Accountants behaving badly

An Oklahoma woman has pleaded guilty to stealing $2.6 million from that state’s Beef Council.

Prosecutors have said [Melissa Day] Morton wrote about 790 fraudulent checks to herself from the Beef Council’s bank account between 2009 and 2016 in order to fund a children’s clothing boutique she opened with her family in 2011.

Once again, I’m amazed at the frequency of embezzling in this scheme. Maybe I’m wrong, but 790 checks over 7 years seem like a lot. Show some restraint, corrupt accountants! If you’re determined to make a fraud last for some Madoff-esque longevity, you can’t be cutting a check to your sham business once or twice a week.

The other thing about this story that’s got me confused is the financing of the boutique. How did she explain this to her family aka business partners? Were they not surprised that ~$30k just seemed to be coming out of nowhere every month for seven years? I guess the trick to creating a successful business out of a fraud is to surround yourself with lots of people who aren’t paying attention.

From the archives

We’re living in the age of Trump and it’s the week before a holiday, so don’t be surprised if things are kinda quiet on the ol’ GC. To make up for it, I’ll reshare this “Accounting Profession Rankings, Ranked” that I stumbled across recently, if only for the GIF.

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