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Unformatted text preview: Phar- Mor Case
This free essay has been submitted by: Nikunj Patel
Total words: 2139 Company Data: IV. Phar Mor Issues: 1. The Phar- Mor case involves a fraud perpetrated by its management team. Although, according to the case, there were no claims that the auditors participated in the fraud, plaintiff's attorneys were able to convince the jury that Phar- Mor was liable for fraud. They alleged that Cooper & Lybrand made representations recklessly with regard to GAAS and GAAP. 2. Accounting Issues: Related party transactions Inadequate MIS Systems Inventory recognition Auditing Issues: Negligence Liability for investor and creditor losses 3. Requirements: Identify engagement between the auditor and client Distinguish power imbalance between auditors and clients Determine from an investor's viewpoint whether it is logical to pursue legal action Comprehend difference between negligence, fraud and recklessness Verify auditor's liability according to Ultramares Doctrine Discuss Securities Acts of 1933 and 1934 Detecting Inventory fraud Recognize "High Risk" factor clients ree
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