Text/HTML
Text/HTML
If you are a registered user please log in to see more postings.
 

The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis.

 
 
Apr 26

Written by: Jack Ciesielski
4/26/2005 6:33 AM 

Yesterday, the SEC and the United States Attorney's Office announced a settlement of $715 million in the case of Adelphia Communications, to be paid to a victim's fund. The case of Adelphia was one of the largest financial frauds to take place in a public company; it's a testament to the strength of the underlying business that there was anything left to sell to Time Warner and Comcast.

Lest you forgot, a brief refresher of what went on at Adelphia's home base in little Coudersport, Pennsylvania, from the SEC news release: "Adelphia, at the direction of the individual defendants: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operating statistics and inflated earnings to meet Wall Street estimates; and (3) concealed rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds for purchases of Adelphia stock and luxury condominiums."

Not the kind of stuff that outsiders could detect too well. And not the kind of stuff the auditor, Deloitte & Touche, detected too well. According to the Wall Street Journal, D&T will announce today the payment of a $50 million fine for failure to detect the ongoing fraud.

Next time you hear someone complain about current audit fees, keep this case in mind. If the auditors are truly auditing the client, it's worth paying up.

Tags: