Leslie Fay

Topics: Management, Audit, Auditing Pages: 1 (282 words) Published: March 7, 2013
When planning an audit, it is important to consider the credibility of the client. In a perfect world it would be in the audit firms best interest to have unethical clients. As we all know even the reputable firms get caught up in a fraud scandal. In the case of Leslie Fay, Paul Polishan had a reputation of being a strict executive that even had rules for what you could have at your desk. He kept a close watch on his subordinates with his tough rules and long hours.

In accordance with AU 230.09, "The auditor neither assumes that management is dishonest nor assumes unquestioned honesty. In exercising professional skepticism, the auditor should not be satisfied with less than persuasive evidence because of a belief that management is honest." BDO should have been more skeptic of the executives at Leslie Fay especially Paul Polishan. Especially because of the reputation Polishan was know for. When you have someone micromanaging everything it makes it easy for collusion even if it is by force. Polishan’s strict character left no room for transparency. BDO should have been more thorough when interviewing employees. We believe that when planning for an audit, the audit risk should always be raised when dealing with a micromanaging CFO that has his hands in everything. Like we saw in the case, when a chief executive is strict and manipulative, it becomes easier to collude on a fraud such as Leslie Fay. The perpetrator of the fraud would have gotten away if it weren’t for the intense questioning from the federal government. It is important for audit teams to increase their professional skepticism and be able to identify the heightened risk.
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