The Accounting Firm Should Pay Damages Of Funds - 1089 Words

Throughout the 1968 audit of Fund of Funds NRPA, GAAS was violated by Arthur Andersen, the firm auditing Fund of Funds, in multiple ways. These violations included ignorance of material irregularities in purchase prices, independence issues, inadequate evidence, and lack of due professional care. The violations of Andersen allowed Fund of Funds NRPA to violate GAAP by overstating assets. According to The New York Times, the violations stated above led to the following verdict: â€Å"the accounting firm should pay damages of more than $80 million to the shareholders of the mutual fund, which is being liquidated in Canada† (Arenson). Fund of Funds was the largest mutual fund, in which many small investors were attracted (Clikeman). The founder of Fund of Funds was Bernard Cornfeld, who started by selling mutual funds to American Military personnel stationed in Europe (Clikeman). After stagnation occurred in the stock market, Cornfeld changed the investment strategy of Fund of Funds (Clikeman). The mutual fund began investing in King Resources under the Natural Resources Proprietary Account (NRPA) Clikeman According to Called to Account, â€Å"King had carte blanche authority to make investments for NRPA.† The ability to make investment decisions for NRPA insured Cornfeld’s trust in King. This trust was greatly abused by King (Clikeman). Although the contract between King Resources and NRPA stated, â€Å"King would sell to Fund of Funds at prices no less favorable than charges to otherShow MoreRelatedWhat Are Generally Accepted Accounting Principles?1448 Words   |  6 Pagesby archdiocese. They felt that Good Counsel’s was solvent so they wanted to close it for finance repairs. 1. What are generally accepted accounting principles (GAAP)? Has the Financial Report in Exhibit 3 been prepared in accordance with GAAP? 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