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Accounting Malpractice

When a national accounting firm was sued for its failure to follow generally accepted auditing standards which would have uncovered a scheme that duped the bankers and the purchaser of a small manufacturing company, FSS was hired to investigate the allegations and testify before an arbitration panel.

A private equity fund made a stock purchase for 100% interest in a small manufacturing company in a fragmented industry.  The goal was to grow the business, buy similarly situated companies and sell stock in a public offering or make an outright sale to a larger private equity group.  A national accounting firm performed due diligence on the manufacturing company and with CPA assurances and a clean audit opinion, the purchase was consummated.  Unfortunately within just two months of closing the private equity group determined that over one-half the accounts receivable were bogus and uncollectible.