Starting at 11:10 AM Where do we go from here!

Starting at 11:10 AM Starting at 11:10 AM

Where do we go Where do we go from here!from here!

Starting Ariel, George and Ken - Information in “Get Starting Ariel, George and Ken - Information in “Get Rich Quick!” was based in part on the New York Times Rich Quick!” was based in part on the New York Times article, article, Flavors of FraudFlavors of Fraud, by Paul Krugman – used with , by Paul Krugman – used with

permission from IIA.permission from IIA.

Get Rich Quick!Get Rich Quick!With Your Own With Your Own

Ice Cream BusinessIce Cream Business

Ask about stock options

Ethyl Enron’s Ethyl Enron’s Ice Cream EmporiumIce Cream Emporium

• Sign contracts to Sign contracts to provide an ice cream provide an ice cream cone a day for 30 years.cone a day for 30 years.

• Underestimate costs - Underestimate costs - a lot. a lot.

• Book all projected Book all projected profits on future salesprofits on future sales

You are very profitable! You are very profitable! Sell stock. Sell stock.

Dynegy’s Double Dip Dynegy’s Double Dip DelightsDelights

• Ice cream isn’t profitable – so Ice cream isn’t profitable – so convince investors it convince investors it willwill be be

• Buy - and sell - 100 cones/day Buy - and sell - 100 cones/day from & to a friend (don’t bother from & to a friend (don’t bother with delivery…)with delivery…)

Sales volume shows you will Sales volume shows you will be a big player in the ice be a big player in the ice cream industry – cream industry –

Issue stock now!Issue stock now!

WorldCom’s 31 FlavorsWorldCom’s 31 Flavors

• Pretend that operating Pretend that operating expenses - chocolate expenses - chocolate and vanilla - are part and vanilla - are part of the purchase price of the purchase price of a new refrigerator. of a new refrigerator.

Without short-term expenses, you look Without short-term expenses, you look profitable – Your stock goes up!profitable – Your stock goes up!

ImClone’s Ice Cream ImClone’s Ice Cream ConesCones

Bad vanilla?Bad vanilla?• Quick! Sell your Quick! Sell your

stock.stock.• Next, tell friends Next, tell friends

to sell.to sell.• Eventually, tell Eventually, tell

others. others.

Auntie Adelphia’s Auntie Adelphia’s Cones and ShakesCones and Shakes

• Get investors to focus Get investors to focus on volume of contracts on volume of contracts rather than profits.rather than profits.

• Invent imaginary Invent imaginary customers. (You don’t customers. (You don’t even need sales!)even need sales!)

Analysts say your stock is a buy!Analysts say your stock is a buy!

Tyco’s Tasty TreatsTyco’s Tasty Treats

We’ll pretend to deliver the ice cream to Alaska. We’ll pretend to deliver the ice cream to Alaska.

You’re “out of state” - No sales tax!You’re “out of state” - No sales tax!

The New MathThe New Math

Dick has 1 scoop.Dick has 1 scoop.Jane has 1 scoop. Jane has 1 scoop.

How many How many scoops do Dick scoops do Dick and Jane have?and Jane have?

Starting at 11:10 AM Starting at 11:10 AM

Where do we go Where do we go from here!from here!

Starting Ariel, George and Ken - Information in “Get Rich Starting Ariel, George and Ken - Information in “Get Rich Quick!” was based in part on the New York Times article, Quick!” was based in part on the New York Times article,

Flavors of FraudFlavors of Fraud, by Paul Krugman – used with permission , by Paul Krugman – used with permission from IIA.from IIA.

The New MathThe New Math1. Count vanilla 1. Count vanilla

cones.cones.2. While auditors 2. While auditors

count chocolate, count chocolate, move vanilla and move vanilla and re-label.re-label.

3. Count “French 3. Count “French Vanilla” cones.Vanilla” cones.

4. Repeat.4. Repeat.

““Gee, Dad – Can Gee, Dad – Can I Get Rich with I Get Rich with

Ice Cream Too?”Ice Cream Too?”Sure, JohnnySure, Johnny – – • How about a big How about a big

corporate loan?corporate loan?• We’ll create a special We’ll create a special

purpose entity!purpose entity!• With ice cream options, With ice cream options,

we can benefit from we can benefit from inflated prices!inflated prices!

Journal of Journal of Accountancy – Accountancy – ““In today’s complex business In today’s complex business environments, conducting a complete environments, conducting a complete audit by surprise would be a practical audit by surprise would be a practical impossibility. In CPA’s natural zeal to impossibility. In CPA’s natural zeal to serve their clients and cause them serve their clients and cause them minimal disruptions, they’ve gradually minimal disruptions, they’ve gradually gotten away from unannounced audit gotten away from unannounced audit work.”work.”

“all change is preceded by

crisis…”Kierkegaard

The Crisis…The Crisis…

Source: Bloomberg

Five of the seven largest bankruptcies in history followed annual reports with clean audit opinions.

““Cooper told the audit Cooper told the audit committee of committee of WorldCom's board that WorldCom's board that the company had been the company had been playing dirty with its playing dirty with its accounting practices.”accounting practices.”

- Time Magazine- Time MagazineCynthia Cooper, Coleen Cynthia Cooper, Coleen

Rowley and Sherron Rowley and Sherron WatkinsWatkins

CCRISISRISIS!!

Opportunity

Dangerous