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Back-In-Time Industries And The Misconduct Of Dan Delay

1085 Words5 Pages

Ethics provides a set of standards for behavior that helps decide how someone will act in a particular situation. In other words, ethics is all about making choices, and providing reasons why the choice was made. There are several ethical issues in our case: the fraud at Back-in-Time Industries and the misconduct of Dan Delay at Dewy Knownun and Howe, Inc. accounting firm. The fraud at Back-in-Time Industries Back-in-Time Industries, a publicly traded company, process the invoice payments that showed on paper that accounts payable were paid when in reality, the payment was never made. On paper, the company was showing great numbers, but in reality, it was unable to pay its vendors. The fraud occurred because the company had drifted from the …show more content…

Arnie Maloff, who is on Board of Directors, often played golf with the outside auditor Dan Delay and discussed the firm’s financial data. It was a lack of independence. During a golf game with board member Arnie Maloff, Arnie told Dan — “we won’t even need to vote to approve you guys this year. Keep sending everyone those great bottles of Glen Livet 21 after the 10Q filings send us those ‘easy on the eyes’ financials!” The Board of Directors, along with Back-in-Time Industries management team lack fairness. They don’t treat other accounting firms equally, impartially and openly, by deciding in advance, without voting who will be the outside auditors next year. At the same time, the outside auditor lack independence as well and violated the Generally Accepted Audit Standards (GAAS). GAAS states that “the auditor must maintain independence in mental attitude in all matters related to the …show more content…

(DKH) accounting firm. Under Adam’s direction DKH has hired a team of CPAs which had experience auditing public companies, and one of them was Dan Delay. Dan joined DKH as an equity shareholder and Security and Exchange Commission (SEC) expert. After a while Adam noticed that Dan was completing / signed off the workpapers late, in addition to not properly storing client’s confidential data. Adam was concerned that these delays have been in violation of the Public Company Accounting Oversight Board’s (PCAOB) requirements for the timely completion and lock down of workpapers and engagement records. The PCAOB standard concerning audit documentation, AS3, provides that "[a] complete and final set of audit documentation should be assembled for retention as of a date not more than 45 days after the report release date (documentation completion date)."(PCAOB) Dan was completing the workpapers pass the 45 days deadline. In fact, an internal investigation revealed that Dan was backdating the system date which allow him to save and sign off on a workpaper on a date in the past. The PCAOB has authority to investigate and discipline “registered public accounting firms and persons associated with those firms for noncompliance with the Sarbanes-Oxley Act of 2002, the rules of the PCAOB and the Securities and Exchange Commission, and other laws, rules, and professional standards governing the audits of

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