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Now You Don't See It

Auditors are less likely to find manipulated earnings when management directs their attention away from areas of financial statements that contain errors.

March 1, 2010

Distraction and deception go hand in hand, whether in a magic act or at a dishonest company. Sam Antar, the ex-CFO of electronics retailer Crazy Eddie, kept auditors away from the company's fraudulent practices in the 1980s in part by having his staff distract them with constant small talk and invitations to coffee and lunch. Around the same time, Barry Minkow, the founder of ZZZZ Best, kept auditors focused on the legitimate side of the business (carpet cleaning) and away from an "insurance restoration" unit, which was fake. Read more...

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