Elisabeth J.

Page
Southern New Hampshire University
Advanced Auditing
Public Company Accounting Oversight U.S. Government Accountability Office
Board (PCAOB) (GAO)

Insufficient Financial
evidence statements
obtained to contain
substantiate material
audit opinion misstatements
 Audit Professionals
Bad for business
Sanctions, fines, and jail
time
Impaired credibility
Stakeholders
Reduced investor
confidence
Disenfranchised employees
Increased scrutiny of
executive leadership
 Company Background Allegations
Once a Fortune 500 Falsified information while
company in Chapter 11
Audited by Fox & Co. False computer runs
Reorganization under Fictitious earnings reported
Chapter 11 in 1982
Secret books
 Weak control environment

Tone at the top

Insufficient audit testing performed

Untimely delivery
 The 12th-largest, US accounting
firm, Fox & Co. (Denver,
Colorado), has been involved in 3
Fox & Co. claims no of the biggest corporate scandals
of recent years. Fox & Co. was the
responsibility independent auditor for O.P.M.
Leasing, Saxon Industries, and
Debate over
Flight Transportation - financially
expectations for troubled companies that
appeared stable to investors
auditors thanks to questionable
accounting methods used by Fox
Nature of fraud - Richard L. Stern, Investigative
13 year period Journalist for Forbes Magazine,
1983
 Company Background Allegations
Network testing software Resigned after being
Victor Alston, CEO investigated
Audited by PWC Accelerated revenue
Fired by PWC recognition
Split POs
Internal control weaknesses
 Material internal control weaknesses

Integrity of executive leadership

Collusion
 Ixia cannot deliver the quarter or
meet revenue recognition any longer
if we continue to book orders in this
manner Its [sic] not a business
Alston steps down choice. Its a business reality
Victor Alston, former CEO of Ixia
PricewaterhouseCoopers
The Company did not maintain, in
drops Ixia as a client all material respects, effective internal
Errol Ginsberg becomes control over financial reporting as of
December 31, 2012, based on
Chief Executive Officer criteria established in Internal
ControlIntegrated Framework
SEC imposes sanctions on issued by the Committee of
Sponsoring Organizations of the
Ixia and Victor Alston Treadway Commission (COSO)
- PricewaterhouseCoopers LLP
 Company Background
Cable television company
Founded by John Rigas
Personal spending
Off-balance-sheet debt
SEC investigation
Allegations
Embezzled money
Hid debt purposely
Overstated earnings
Put personal interests
ahead of shareholders
 No auditor rotation

Questionable auditor independence

Poor control environment

Auditor incompetence
 "It was a case of being in the wrong place
at the wrong time. If this had happened a
year before, there wouldn't have been
any headlines
Claimed ignorance John Rigas
Announced plan to Among our most significant challenges is
the early detection of fraud, particularly
improve fraud detection when the client, its management and
others collude specifically to deceive a
and prevention company's auditors
SECs Administrative Order James Quigley, CEO of Deloitte

Largest fine ever paid by
an accounting firm
They didn't just miss red flags, they
pulled a flag over their head and then
claimed they couldn't see
- Mark K. Schonfeld, Director of the
Northeast Regional Office of the SEC
 Overall Risk Assessment

Audit Planning

Specific Audit Program Steps

Audit Time Budgets

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