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- Title
REFCO: OUTWITTING THE AUDITORS.
- Authors
Lingenfelter, Gabriele; Barger Johnson, Jennifer L.
- Abstract
On October 10, 2005, Refco, Inc. announced that an entity controlled by its Chief Executive Officer, Phillip R. Bennett, and owed $430 million to Refco. Refco immediately announced that investors and other third parties could no longer rely on its financial statements. The financial statements violated Generally Accepted Accounting Principles (GAAP). Grant Thornton, Refco's independent auditor, missed numerous fraud risk factors and gave an unqualified audit report on the financial statements included in Refco's Registration Statement and Prospectus. The students are asked to identify the three conditions (fraud triangle) that are usually present when fraud occurs (AU 316.04). The students are also required to review SAS # 99 and the risk factors that relate to misstatements arising from fraudulent financial reporting (AU 316.85). The critical incident then asks the students to apply the fraud triangle to the Refco case and to identify the fraud risk factors occurring in the case.
- Subjects
REFCO Inc.; CORPORATE debt; CORPORATE finance; FINANCIAL statements; FINANCIAL performance; ACCOUNTING standards; AUDITING standards; ACCOUNTING ethics; BENNETT, Phillip R.
- Publication
Journal of Critical Incidents, 2009, Vol 2, p109
- ISSN
1943-1872
- Publication type
Article