How Does a Review Differ from an Audit

Topics: Auditing, Audit, Auditor's report Pages: 4 (1375 words) Published: March 5, 2014
Pedro Cortes

The critical issue is that Barry Minkow scammed the public out of millions of dollars and it went undetected by independent auditors and the SEC for a long period of time. •Critical factor # 1- None of the auditors were able to detect the fraud that ZZZZ Best Company was committing. George Greenspan, the first auditor, said that they believed the insurance restoration contracts were real because he contacted a third party to confirm that they were real. Tom Padgett, the person that Greenspan relied on, was a participant of Minkow’s fraud scheme. Because of this, Greenspan was unable to detect fraud. Ernst & Whinney were his successor auditor. •Critical factor # 2- One way ZZZZ Best was able to avoid detection of their fraud is by disguising their Ponzi scheme as insurance restoration contracts. Most of the money ZZZZ Best was making came from fake restoration contracts. The company was able to get away with this for so long because they went to great lengths to conceal their scheme. Minkow was able to convince Padgett to work with him on this scheme. Padgett was the principal officer of Interstate Appraisal Services. This made it easy for Minkow to hide their fake restoration contracts since he had a third party supporting his story. ZZZZ Best also found a location where they could convince the auditors that they had a contract for the restoration of the building. They paid off the building’s security officer to ensure that their scheme would not be revealed. •Critical factor # 3- Barry Minkow was convicted on 57 counts of securities fraud, money laundering, embezzlement, tax evasion, and bank fraud. It wasn’t until a woman that was a victim of one of Minkow’s scam that his fraud was detected. She gathered other people who had been scammed and sent all of her findings to the Los Angeles Times. This is what eventually led Minkow to be caught. He was sentenced to 25 years in prison. •Critical factor # 4- Ernst & Whinney did not...
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