NCJ Number
68219
Journal
Internal Auditor Dated: (OCTOBER 1976) Pages: 20-24
Date Published
1976
Length
5 pages
Annotation
AN EXAMINATION OF FRAUDULENT ACTIVITIES AT THE EQUITY FUNDING CORPORATION OF AMERICA POINTS TO THE NEED FOR MORE THOROUGH EXAMINATIONS OF INTERNAL CONTROL SYSTEMS AND GREATER INTERFACE BETWEEN AUDITORS AND EXECUTIVES.
Abstract
THE CASE INVOLVED THE RECORDING OF FICTITIOUS INCOME ON EQUITY'S BOOKS WHICH CREATED A RECORD OF INCREASING EARNINGS AND DROVE UP THE PRICE OF THE COMPANY'S STOCK. A SPECIAL COMMITTEE FROM THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, WHICH INVESTIGATED THE COMPANY'S ACTIVITIES, REPORTED THAT THE ABSENCE OF INTERNAL AUDITORS WAS IRRELEVANT BECAUSE THEY WOULD HAVE BEEN A PART OF THE CONSPIRACY. MOREOVER, THE FRAUD WAS COMMITTED BY MEANS OF FORGERY, COLLUSION, AND UNRECORDED TRANSACTIONS, ALL OF WHICH ARE DIFFICULT IF NOT IMPOSSIBLE TO DETECT EVEN BY THE BEST AUDITORS. ALSO, THE COMMITTEE'S REPORT IMPLIES THAT INDEPENDENT ACCOUNTANTS WERE NOT THOROUGH ENOUGH IN VIEW OF THE ABSENCE OF INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS AT EQUITY. MORE INDEPTH TESTING OF THE WORKINGS OF INTERNAL CONTROL SYSTEMS IS RECOMMENDED. A LIST OF 11 REFERENCES IS PROVIDED. (ELP)