Discussion Post
For this discussion, read the article on the Arizona Baptist Foundation's accounting fraud ADA ready
I. Which Arizona agencies are suing Arthur Andersen? What is the principal allegation in the lawsuit against Arthur Andersen? What is the firm's response? What other actions are state agencies taking against Arthur Andersen?
II. What was the nature of the alleged fraud at the Baptist Foundation of Arizona? What is a Ponzi scheme? How does a Ponzi scheme operate? What is the typical result of such schemes? How did BFA market itself to investors?
III. How did BFA fare in its investments? How did it cover up its real estate losses during the 1980s? How did it convince Arthur Andersen that it was making gains on these investments? Why should auditors be especially careful in reviewing related party transactions?
IV. According to the lawsuit, what warning signs did Arthur Andersen ignore? What evidence is cited in support of the allegation? Did Arthur Andersen do anything to suggest that they did heed the warning signs?
V. According to the article, "The suit says the auditor routinely gave BFA unlimited copies of audited financials, which were subsequently distributed to investors." Should this behavior be grounds for a lawsuit? Should investors be denied access to audited financial statements of companies that solicit investments? Would BFA have been unable to photocopy and distribute its audited financial statements to investors if it wanted to do so?