ABSTRACT
Samuel George Greenspan issued a clean opinion on ZZZZ Best’s 1986 financial statements without ever suspecting that nearly 50 percent of the company’s reported revenues were entirely fictitious. ZZZZ Best and Crazy Eddie were only two of the most outrageous accounting frauds discovered during the 1980s. In the fall of 1985, shortly after Representative John Dingell’s Commerce Committee held its first round of hearings, the American Institute of Certified Public Accountants and other professional accounting associations decided to sponsor a National Commission on Fraudulent Financial Reporting. In April 1988, the Auditing Standards Board issued nine Statements on Auditing Standards intended to narrow the “expectation gap” between what financial statement users believed auditors were responsible for and what auditors themselves believed they were responsible for. Overvaluing assets was another common means of committing fraud. Overall, the report highlighted the importance of an effective and independent audit committee and emphasized the importance of the organization’s control environment.
