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Obvious Sign of Fraud: You’re Having Sex with the Client

Posted on by Caleb Newquist

distraction.jpgIn case you young auditors thought you needed to have highly acute senses to detect fraud at your clients, you’re dead wrong.
Best thing you can do is immediately become skeptical if you find yourself trying to figure out the best posish for the client’s office supply room:
More, after the jump

“These auditors from the Big Four accounting firms are usually single kids just a few years out of school. What do kids in their 20s think about all the time? Sex,” said [Sam] Antar, who was at the center of a multi-million dollar fraud 20 years ago.
So Antar would pair “cute hot female” employees with male auditors as part of his distraction strategy. “In effect, I was a fraudster, matchmaker and pimp,” said Antar, who avoided jail time by working with the U.S. government, and now advises government agencies and businesses on avoiding accounting fraud.

As we’ve covered, the opportunities for accountants to get some action can be few and far between so this strategy makes perfect sense.
This will put many of you in a very difficult situation. We really wish the best for all you of in the getting laid department especially when it involves someone that would ordinarily be way out of your league.
But you may have to decide: Do you uncover the next diabolical Ponzi scheme or do you totally cave to the irresistible charms of the guy that looks way too much like Chace Crawford?
Who would it take for you to overlook a few million in misappropriated funds? Discuss in the comments.
Financial fraud — accounting for criminals [CNN]

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PCAOB, We are Paying Attention

TOLD YOU.jpgPublic accounting could learn a thing or two from Wall Street. What if we treated the PCAOB like Goldman Sachs does the CFTC and the Treasury? Can you imagine PwC partners dispatched into high-profile regulatory positions doing the dirty work for them? We’d save millions in intern fees (oh wait) since no one would have to run a single shredder.
Case in point, the head of the CFTC (who used to work at Goldman) says, “I believe that position limits should be consistently applied and vigorously enforced. Position limits promote market integrity by guarding against concentrated positions.” And what does he do? Block GS competitors with federal limits while letting his friends run wild in commodities futures. We need one of those on our team!
More, after the jump


Oh wait a minute, we already have that! And it gets better, not only does his work history read “E&Y”, he used to be on Fed payroll as well. Double winner – this is the guy you want heading up the audit board? That’s laughable.
Remember?

Mark W. Olson was recently appointed head of the Public Company Accounting Oversight Board by Chris Cox, SEC Commissioner. This ends months of uncertainty about leadership at the PCAOB or Peekabo as it is popularly known. Mr. Olson was a Governor at the Federal Reserve Board.

In fact, the PCAOB chair’s wife probably hangs out with Goldman wives. A quick glance at his resume reveals the sorts of circles Mr Olson travels in; future partners of Big 4 firms might start setting their goals right about now if they’re trying to out-schmooze this guy.
So if you believe Wall Street and the auditors are that different, you’re wrong. No one is going to call Deloitte the vampire squid but it might be a good idea if we started looking at our own questionable regulatory ties. Perhaps accounting can learn a thing from Wall Street before it hits us like it has them?
And who is letting things go to hell?
Now that Olson has abandoned the PCAOB for bigger and better things, we can only hope his mustachioed replacement and those who come after continue the tradition of questionable business associations set forth by our friends at Goldman Sachs and of course the Big 4. Life just wouldn’t be the same without it.

Overstock.com to Restate Financial Statements; Reassures Profitability for 2009

Well, then. This all very awkward for Pat Byrne and Co.

In an 8-K filed late yesterday Overstock.com announced that it would be restating the consolidated financial statements contained in its 2008 annual report, and the those contained in the Company’s last three 10-Q’s: period ended March 31, 2009; June 30, 2009; and September 30, 2009 (unreviewed!).

It goes without saying that those financial statements can no longer be relied upon.


The restatement is a result of errors that Overstock fired Grant Thornton for last year that led to a bit of a cat fight between the firm — who is not mentioned in the filing — and humble servant Patrick Byrne.

The Big O also admitted that it “incorrectly amortized the expense related to restricted stock units based on the actual three year vesting schedule rather than a three year straight line amortization and applied an outdated forfeiture rate in calculating its expense under the plans.” While they were at it, they threw a bunch of other corrections that were “[not] material either individually or in the aggregate,” as the saying goes.

The Company is still mulling over the numbers with both PwC and KPMG so there’s a chance that they could change but as of now, $1.9 million of income is going back to 2008 from 2009 and an increase in expense of $350k in 2008 and $900k in 2009.

But wait! The filing reminds us that “Patrick Byrne, the Company’s Chief Executive Officer, had stated to The New York Observer, ‘that the company is about to report its first annual profit.’ The Company continues to believe that it will report positive net income for fiscal 2009.” Whew! See shareholders? More commitment from your servant.

Sam Antar has been following this story from the very beginning and he is not shy about being vindicated:

Today’s news is a complete vindication of my analysis of Overstock.com’s financial reports and shows that the company willfully engaged in a financial reporting manipulation scheme. The company is restating its financial reports to correct GAAP violations, exactly as I have recommended in this blog. To date, every single initial financial report issued by Overstock.com throughout the company’s entire existence has violated GAAP or some other SEC disclosure rule. The company now has the dubious distinction of having to restate its financial reports three times in the last three years to fix GAAP violations.

We shot Sam an email last night and he simply told us, “I am going out for a glass of fine wine.”

So while this appears to wrap up the SEC’s Division of Corporation Finance investigation, one little problem that still remains is that the SEC’s Enforcement Division has not wrapped up its probe of the company. Yeah; so there’s that. Considering the the track record of the SEC, we’d typically give a company a 50/50 shot of coming out of a probe by the Enforcement Division unscathed but in the case of Overstock, we’ll be going with Schape’s crew.