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I listened to a documentary about the Crazy Eddie electronic chain, which was fraudulent to the core but passed audits. The ex-CFO made an interesting comment:
by altacc 4y ago
I listened to a documentary about the Crazy Eddie electronic chain, which was fraudulent to the core but passed audits. The ex-CFO made an interesting comment: when large accounting firms do an audit, they're checking what the business has recorded on its accounts adds up, they're not checking if the reality behind the accounts are correct. As long as your books balance, you look healthy.
- dannylandau 4y agowhat the documentary called and where can you stream it?
- altacc 4y agoGoing back through my history, it's actually an episode of the Criminal podcast: https://thisiscriminal.com/episode-211-crazy-eddie-3-17-2023/ https://thisiscriminal.com/episode-211-crazy-eddie-3-17-2023...
- caminante 4y agoYeah, audit can mean many things and the scope matters. Typically, it's just compliance. Diligence usually means talking to top customers, but deals get rushed, access is a negotiation point, and liars are hard to detect.
- mbesto 4y ago> they're checking what the business has recorded on its accounts adds up, they're not checking if the reality behind the accounts are correct. Not necessarily true. Depending on the type of audit, part of the audit is to cherry pick (or randomly pick) recorded accounts and confirm whether they are backed up by various documents. For example - anyone can put in a receipt for a plane ticket and then have that plane ticket hit the P&L as a journal entry. But an auditor may look at the plan ticket receipt and check for the date, name of person on it, what date they were flying, what was their origin an destination, etc. etc. Source - currently under audit, and auditors are asking for confirmed records that support what is in an accounting system.