It was a family operation, where top bosses mingled with workers on the assembly floor, where the chief executive juggled five major titles at once, where the board of directors barely changed in 20-plus years.
And where the company's vice president of finance could move around millions of dollars without approval from above.
In this unquestioning environment, authorities say, then-Koss Corp. executive Sujata "Sue" Sachdeva was able to spend more than $31 million in Koss funds on a lavish lifestyle and extravagant shopping sprees.
Grant Thornton, the company's auditors, accept no blame; audits aren't perfect and if the financial controls of a company appear to be appropriate and in place, an audit won't necessarily catch fraud. Though you'd think Grant Thornton would have tripped across an embezzlement of $31 million in a company with assets of $28.5 million and gross sales of $38.2 million. Still, it's a textbook example of the shortcomings of the accounting profession. We can only do so much. The rest is up to the company.
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And, since, typical of many family owned businesses, they didn't know enough to hire a cost accountant to let them know how much they make on each product sold, they couldn't tell that profits were out of line.
ReplyDeleteCommon sense should prevail but then common sense for those without an accouting bent/inclination/mindset is entirely different.
But, any self-respecting CPA should decline to work on a firm with such lax and ignorant controls "of almost any kind", eh?!
I agree, Ben. For the vast majority of companies, the accounting rules work well and the wheels of commerce roll smoothly. Grant Thornton should have run for the hills when they discovered the controls were lacking but, instead, chose to issue their opinion anyway. And stay on year after year after year. (Or, I assume they did, anyway. They could have just now taken over from another firm. I can't be bothered to check it out.)
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