us_10_10c_an_offer_you_cant_refuse_072310

us_10_10c_an_offer_you_cant_refuse_072310 - Case 10-10 An...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
An Offer You Can’t Refuse Fast Eddie, a publicly held company, manufactures and installs refrigeration systems for governmental and commercial applications. Fast Eddie is being investigated by a governmental agency for overpricing on government sales during the period from 2003 through 2005 as well as allegations of misrepresentations by one of Fast Eddie’s former officers, Sweet Lou. The criminal and civil investigations began in late 2005. In the prior fiscal year, the company’s auditors, CPAs-R-Us, obtained management’s representation and a letter from Fast Eddie’s independent legal counsel that indicated that the ultimate outcome of the investigation could not be determined and that any potential payment for the alleged breaches would not have a material effect on the financial statements. Accordingly, no accrual was recorded in the financial statements, and CPAs- R-Us issued a standard unqualified opinion on Fast Eddie’s 2006 financial statements. Fast Eddie’s fiscal year-end is March 31. The government commenced its investigation into the allegations in late 2005 by obtaining a subpoena for all of Fast Eddie’s corporate records (both hard copy documents and computer files) related to government sales during the period in question. In 2006, the government provided Sweet Lou with a report detailing the allegations of defective pricing. At that time, Sweet Lou alerted the other officers at Fast Eddie of the manner in which he had prepared the documents in question. Fast Eddie immediately began an internal investigation to ascertain whether proper procedures had been followed when completing the governmental sales forms. Fast Eddie also retained an expert legal counsel in the field of procurement law in an attempt to determine whether the company had any legal exposure as a result of Sweet Lou’s actions. Fast Eddie determined that the sales forms had been completed incorrectly; however, the government was not overcharged for any equipment or services. As a result of its findings, Fast Eddie dismissed Sweet Lou after 18 years of service with the company. Since then, all of Fast Eddie’s officers and employees have fully cooperated with the federal investigators by providing testimony of their knowledge and involvement in the transactions. As of March 31, 2007 (current-year period), the government had not filed any charges or specified a monetary penalty against Fast Eddie for these matters. In April 2007, Fast Eddie documented in a letter an offer to settle the government’s investigation of the company for the sum of $3.7 million. This letter was delivered to government officials in April 2007, before CPAs-R-Us completed its procedures and issued the audit report for the year ended March 31, 2007. Management contends that this offer was made solely to accelerate the process and serve as grounds for a future claim against the government to recover attorneys’ fees. In addition, management contends that it believed this offer would be rejected on the basis of previous discussions with government officials. Copyright 2008 Deloitte Foundation
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 7

us_10_10c_an_offer_you_cant_refuse_072310 - Case 10-10 An...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online