United States Surgical Corporation
Alex Gonzalez & Daniella Trinchet
Professor C.E. Reese
in partial fulfillment of the requirements for
ACC 540 – Fraud Examination
School of Business / Graduate Studies
St. Thomas University
Miami Gardens, Fla.
Term A7 / Fall, 2014
October 24th, 2014
Table of Contents Issues 1 Facts 2 Analysis 5 Conclusions/Recommendation 12 References/Bibliography 14
1. What audit procedures that, if employed by Ernst & Whinney during the 1981 USSC audit, might have detected the overstatement of the leased and loaned assets account that resulted from the improper accounting for asset retirements?
2a. For USSC to extend the
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Each initiative required multimillion dollar commitments by USSC in which threatened the company’s profits and the ability to raise additional capital needed to finance its rapid growth. Hirsch eventually overcame the major challenges and maintained its dominant position in the surgical stapling industry and continued reporting record profits and sales each year. Unfortunately, the record profits mounted suspicion that USSC’s reported operating results were too good to be true and the SEC launched an investigation on the company’s financials. The SEC ruled that the company had used a variety of manipulative devices to overstate its earnings in its 1980 and 1981 financial statements. USSC settled SEC charges by signing an agreement in which forced the company to reduce its previously reported earnings by $26 million. Also, senior executives of USSC agreed to return the large bonuses they had been paid during 1980 and 1981. Hirsh stated the SEC sanctions were long, costly and a time consuming litigation. The SEC investigation charged USSC with several abusive accounting and financial reporting practices. The main focus was on an elaborate scheme to charge inventoriable production costs to a long term asset account, molds and dies. The scheme required the cooperation of several of USSC’s vendors in which was a deliberate