{"id":4400,"date":"2010-01-17T10:00:36","date_gmt":"2010-01-17T16:00:36","guid":{"rendered":"http:\/\/www.sequenceinc.com\/fraudfiles\/?p=4400"},"modified":"2011-08-14T10:26:42","modified_gmt":"2011-08-14T15:26:42","slug":"koss-corp-fraud-defending-grant-thornton-no","status":"publish","type":"post","link":"https:\/\/www.sequenceinc.com\/fraudfiles\/koss-corp-fraud-defending-grant-thornton-no\/","title":{"rendered":"Koss Corp. Fraud: Defending Grant Thornton? No."},"content":{"rendered":"

\"fraud\"<\/a>I have been criticized for \u201cdefending\u201d Grant Thornton, the auditors of Koss Corp<\/a>, which has suffered a fraud loss of at least $31 million at the hands of the company’s Vice President of Finance, Sue Sachdeva. In fact, my comments relating to this case are not<\/strong> a defense<\/strong> of Grant Thornton, in the least. They are meant to point the finger squarely at Koss management, which is wholly responsible for this fraud<\/a>.<\/p>\n

I’m not saying that Grant Thornton did a bang-up job when it comes to Koss. I couldn’t possibly know that without knowing exactly how the fraud was carried out (Koss still hasn’t said) and without seeing GT’s workpapers and taking a good look at what they actually did. What I am saying is that audits have so little usefulness and are so awful at detecting fraud<\/strong><\/a>, that it’s a given that a woman like Sue Sachdeva would easily be able to get away with a massive theft.<\/p>\n

How often do we see an executive running off with a company’s money while auditors were hovering? We see it all the time.\u00a0 Enron, WorldCom, and Tyco brought fraud by management to light, and the problem still exists several years later. Legislation such as Sarbanes-Oxley hasn’t cured the problem, in fact, a recent study by the Association of Certified Fraud Examiners found that the problem is even worse than before SOX. <\/a>This is a persistent problem, one that auditors clearly haven’t been able to eradicate, so to suggest that Grant Thornton should have stopped the fraud (when all the other large auditing firms have failed to find fraud at their clients too) is nonsense.<\/p>\n

My respected colleague Francine McKenna did a great deal of research and writing about why Grant Thornton shouldn’t get a pass in the Koss case<\/a>. She’s found a lot of interesting information about Koss Corp., its finance function, its auditors, and its management in general. But instead of proving why this makes Grant Thornton guilty, it only seems to prove my original theory: that management alone is to blame for this fraud<\/strong>.<\/p>\n

Francine points out the following notable facts:<\/p>\n