The Auditor’s New Excuse – "I Was Duped!"

1. To trick or deceive.

Thesaurus: delude, hoodwink, hoax, swindle, trick, deceive, cheat, bamboozle, defraud, rip off (slang), con (slang).

2. A person who is deceived.

Thesaurus: victim, pawn, puppet, gull, stooge, slang:sucker, pushover, easy mark, sap, fall guy.

It isn’t pretty, this defense, but it’s being used more and more.

Auditor duped by Peregrine, lawyer says

“The attorney for former Arthur Andersen auditor Daniel F. Stulac built his closing argument around a recurring question yesterday as he addressed jurors in the Peregrine Systems financial fraud trial.

“If Stulac was in on the fraud,” defense lawyer Michael Attanasio asked, “then why did they lie to him? And why did they have to conceal so many things from the audit team?” Federal prosecutors allege that Stulac, 42, helped Peregrine’s top executives deceive investors by allowing the San Diego software company to post exaggerated financial results. Prosecutors contend that Stulac deliberately ignored a host of specific warnings that arose at Peregrine while he headed a group of independent accountants responsible for auditing the company’s financial results.

Attanasio conceded that Stulac might have “stumbled” as an auditor, but he argued that Stulac never intentionally joined the scheme among Peregrine’s key insiders to fraudulently boost the company’s revenue.

“They were exploiting Stulac, exploiting any weaknesses that he had, because that’s the sort of people they are,” Attanasio said. “They had been successful, terrifically successful, in pushing lie after lie past Stulac.”

KPMG is using this excuse to sue Fannie Mae. Are they going to claim it again when they get sued by the creditors at New Century? Certainly they’re getting their defense ready now that the bankruptcy examiner is after their documents.

And PwC is claiming it as a reason why they have to withdraw ten years of audits for Yukos.

Is this really a way for the Big 4 to act, all stupid and vulnerable? What won’t they do to avoid trials and judgements… Or maybe this is the way they throw individual partners under the bus and not the whole firm, like KPMG said they were duped by the “evil” tax shelter partners.

I call a case of disingenuousness…

4 replies
  1. Thomas Yake
    Thomas Yake says:

    I applaud the coverage you have given this important topic. Unfortunately, the events regarding this scandal differ little from many others in the past decades. Remember Enron? Will it ever stop? By now, the facts should prove that Sarbanes-Oxley was another knee-jerk reaction by Congress and passed without any hope of achieving substantive change.

    My area of specialty is the retail industry. We have documented over 200 retail business failures since the late 1980s—where the auditing firms gave a “wink” along with the audit and the end result was these businesses failed, thousands were left unemployed, and hundreds of investors were duped. Most of these retail failures had one common denominator: the inventory had been overstated to puff-up the stock value. In other words: Same circus, different clowns!

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