Hog fraud, negligent audit committee, disclosure omissions and more


By Gerry Zack, CFE, CPA, CIA
“gerry-zach”

ACFE Cookbook: Explaining the many recipes for financial statement fraud

Welcome to the first chapter of "The ACFE Cookbook," in which we'll examine recent cases and news involving alleged financial reporting fraud. Our focus will be global, so no matter where you are, if you see news of financial reporting fraud, we'd like to hear about it for possible coverage. Send your links, news or information on public reports of alleged fraud to gzack@bdo.com.  — ed.

In this issue, we cover a recent case and the latest chapter in an older case. But first: a case with a twist.

AUDIT COMMITTEE CHAIR CHARGED IN ACCOUNTING FRAUD

It's very unusual for members of a company's audit committee to be charged in connection with a financial statement fraud. The company itself is normally charged and — if any individuals are named — it's usually the CFO, the CEO or some other member of management. However, as audit committees globally continue to take on greater importance and are the targets of increased regulation, we shouldn't be surprised that legal ramifications of fraud are beginning to affect the individuals who serve on these important committees. [See the U.S. Securities and Exchange Commission (SEC) release.]

In March, the SEC alleged that the former audit committee chair of AgFeed Industries Inc. failed to perform his gatekeeper function. AgFeed, which filed for bankruptcy in July 2013, was a publicly traded hog and feed production company with operations in China and the U.S.

 


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