I'm embarrassed. I just finished an article about the $31 million fraud case at Koss Corp. Its auditor, Grant Thornton, said, "The company did not engage Grant Thornton to conduct an audit of internal controls over financial reporting. Establishing and maintaining effective internal controls is management's and the board's responsibility."
Way back when I was an auditor for a Big Eight firm, I learned that evaluating a company's internal controls was a critical component of establishing the scope of the audit work. Whether the Sarbanes-Oxley requirements were operative or not, the auditor has an obligation to evaluate the internal controls as a normal part of their financial statement audit. The fraud exceeds 15 percent of company sales. It's hard to imagine anyone who would not find that anything over 15 percent is not "material." There is no way those amounts should have slipped by the auditor for five years!
Grant Thornton does the profession a grave disservice by not admitting that just maybe they missed something. Oh, I know, the liability of admitting we are human can be painful, but if we as a profession want to hide behind SOX, we lower ourselves to the level of the politicians and we deserve the same level of approval as they get.
Michael G. Murray, CPA
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