Company Fraud An Evaluative Report

timer Asked: Jan 5th, 2018
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Portfolio Choice #1: Company Fraud: An Evaluative Report

The Portfolio Project for ACT450 is a research report that identifies and analyzes a company that has been indicted for fraud. The report also will evaluate the auditor’s role in relation to the fraud.

  1. To conduct your research, choose as a case study one of the companies listed below, or obtain approval from your instructor to use a public company not on the list. (Choose whichever company you want)
    • Just for FEET, Inc.
    • Health Management, Inc.
    • Jamaica Water Properties
    • The Leslie Fay Companies
    • NextCard, Inc.
    • Crazy Eddie
    • ZZZZ Best
  2. Your report must describe the issues surrounding the company and any company policies in relationship to the impact those might have on public audits/accounting.
  3. Provide the following elements in your paper:
    1. An executive summary identifying the company, the fraud, the affected stakeholders, and the ultimate resolution
    2. A brief history of the company
    3. An analysis of the auditor’s role in the fraud, including any auditing standards that the auditors did not follow
    4. Identification of internal controls that were circumvented or lacking and that could have prevented the fraud
    5. Identification of accounting policies currently in effect that are designed to prevent similar problems from occurring again, or, if no policy exists, a proposal of a solution that would prevent a recurrence

Your paper should be 8-10 (Just write 8) pages in length. Follow APA format, according to CSU-Global Guide to Writing and APA Requirements. Include a title page and reference page. Use four outside academic sources other than the textbook, course materials, or other information provided as part of the course materials.

Tutor Answer

Chancellor Ivy
School: University of Virginia


Running head: COMPANY FRAUD


Company fraud: The Leslie Fay Companies accounting scandal


Institutional affiliation



Executive Summary
Leslie Fay companies Inc is an American company that designs, manufactures and
markets human apparel (, n.d.). The company was started by Fred
Pomerantz who used to make dresses for the female corps during the Second World War. In
1947, Pomerantz decided to put his talent to use and started the company. The company had
never experienced accounting fraud till 1993 when a huge accounting fraud was exposed. During
the time American economy was experiencing a recession, and all the competitors were cutting
back production and sacking employees. On the contrary, despite it producing outdated products,
Leslie Fay companies Inc, to the surprise of everybody else, remained healthy and its sales were
going up. Its shares kept on gaining value in the stock market (, n.d.). In
1993 however, the company CFO reported to the CEO that the financial controller has been
overstating inventory, understating liabilities and expenses and inflating profits for the past three
years. All this was happening despite the company having hired external auditor BDO Seidman
to oversee accounting and financial information since the 1970s. When the information on the
fraud reached media, several lawsuits by the most affected stakeholders, the investors followed
with the company management and the BDO Seidman being named co-defendants. The
company ended up filing for bankruptcy in 1994. Despite the setback, the company reemerged
strongly in the late 1990s. The company together with BDO Seidman paid vast amounts in
settlement of lawsuits and the chief engineers of the fraud including the financial controller
Donald Kenia ended up being implicated in the crime. To prevent such fraud from reoccurring
the company implemented several measures including the establishment of the audit committee
for planning and conducting regular internal audits and establishing a hotline for fraud reporting.
The Leslie Fay Companies History



Leslie Fay Inc. is a United States company that deals in designing, manufacturing and
marketing women’s dresses, blouses, and sportswear. Its merchandise is sold in most cases by
department stores. The corporation has established itself as the second largest maker of women’s
clothes. The company traces its founding in the year 1947. Fred Pomerantz was the founder of
the company. He had made dresses for female army corps during the Second World War and
capitalized on that experience to start Leslie Fay companies. Fred Pomerantz named the
company after his daughter. The company made huge profits from manufacturing stylish
conservative women pieces of clothing. The company went public in 1952. The company went
by the name Leslie Fay Inc between 1959 and 1982. In 1972, the son of the company’s founder
John Pomerantz became the company’s president. In the 1980s when other big companies
computerized operations to increase e...

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Thanks, good work

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