Audit Firms Suggesting Companies Be Required to Have Forensic Audits

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The six biggest accounting firms in the United States have suggested that companies should be forced to submit to forensic audits every three to five years. These types of engagements would be aimed at finding fraud.

The six firms include PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, KPMG, Grant Thornton and BDO Seidman. They say their proposal is aimed at starting discussions about what investors should expect from auditors when it comes to fraud. (Incidentally, traditional independent audits are not designed to detect fraud, and the users of financial statements are mistaken if they think the audits will detect fraud.)

One accounting educator remarked that audit firms should just change traditional audits to be “done properly” and detect fraud.

Computer Associates Ex-Executive Sentenced to Prison

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Sanjay Kumar, the former chief executive of Computer Associates International (now called CA Inc.) has been sentenced to 12 years in prison and fined $8 million for his guilty plea to charges of securities fraud and obstruction of justice.

Prosecutors say that Kumar created “35-day months” in order to book additional revenue after a quarter ended and the books should have been closed. He then engaged in a cover-up scheme meant to silence a witness to the accounting misdeeds. It is believed that the fraud cause the company to misstate revenue by $2.2 billion Continue reading

Richard Hatch of “Survivor” fame gets prison sentence

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The first winner of the popular reality television show “Survivor” was sentenced to 51 months in prison for his conviction on tax evasion charges. Richard Hatch, 45, was convicted in January of failing to pay taxes on the $1 million prize he won from the TV show, as well as other income. He was sentenced in May to 51 months in prison. Hatch was initially housed in a county jail in Massachusetts, and was later moved to a federal prison in Oklahoma. The judge handing down the sentence chastised Hatch for lying repeatedly on the witness stand.

The IRS Is Using Outside Debt Collectors

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Starting in September, the IRS is contracting with outside debt collectors to go after delinquent taxpayers. The American Jobs Creation Act of 2004 authorized the IRS to contract with private firms to do this work. The three firms currently under contract to perform these services are The CBE Group Inc., Linebarger Goggan Blair & Sampson, LLP, and Pioneer Credit Recovery, Inc. Continue reading

Happy Halloween… witch tales

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A court in Munich, Germany has ruled that a witch must refund a fee paid by a client, for whom her “love spell” failed. The client paid about $1,275 for the witch to help win back her boyfriend, who left her in the fall of 2003.

The court ruled that the service offered by the witch was “objectively comletely impossible”. The witch said she never guaranteed success for her client, who carried out the witch’s ritual several times, each under a full moon.

Hacking into ATMs with a few internet searches

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Who would have thought it would be this easy to break into an ATM and run off with all the money?

CNN recetnly reported that a man was able to reprogram an ATM at a gas station, so that it would dispense $20 billions instead of $5 bills. Someone went to work to find out how he did it, and found that an operation manual for that specific type of ATM, a Tranax Mini-Bank 1500 Series, could be found legally in about 15 minutes.

The investigator who found the manual, Dave Goldsmith of Matasano Security, didn’t reveal exactly how he found the manual which had master passwords and security information about the ATM. However, a PDF file containing the same information was found with a simple Google search. The online manual was found freely available on the website of a Canadian reseller of the machines, and details the procedure to reprogram the machine, as well as change passwords.

Guilty pleas in Coca-Cola trade secrets case

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Two of the three people accused of conspiring to steal trade secrets from Coca-Cola and sell them to rival Pepsi pleaded guilty on Monday to one federal charge of conspiracy. The attorney for the third accused conspirator, Joya Williams, says she will not plead guilty.

Ibrahim Dimson and Edmund Duhaney each face up to 10 years in prison and a $250,000 fine. They will be sentenced on January 29, 2007.

Joya Williams worked as an administrative assistant for Coke’s global brand director, and allegedly had access to samples of new products and confidential information regarding Coke’s trade secrets. Duhaney told a judge that she contacted him about the scheme, and he then contacted Dimson, who was to make a deal worth $1.5 million with Pepsi.

The scheme was exposed when Pepsi officials contacted Coca-Cola about the scam. A search of Duhaney’s home on July 5 turned up Coca-Cola product samples and confidential company documents. The three were indicted on July 11.