Cendant

Advanced Auditing – MBA 6312 Name: Tooba Faheem Case 3.4: Cendant Corporation Audit Section: AU section 230,314,316,319 Facts: • CUC International, Inc. (CUC) and HFS, Inc. (HFS) were merged and Cendant Corporation was created in December 1997. • At the time of the merger, Cendant had a market capitalization of approximately $29 billion, making it one of the 100 largest U.S. corporations. • Ernst & Young, LLP and Deloitte & Touche, LLP audited the CUC and HFS accordingly. Deloitte & Touche, LLP was selected as the successor auditor for Cendant. • Deloitte & Touche, LLP noted that there were non-material disagreements between the company and Ernst & Young, LLP regarding accounting or auditing matters. • The fraud occurred at CUC prior to its merger with HFS. Originally it was announced that as a result of the fraud CUC’s 1997 earnings were overstated by $100 to $115 million. Later it was disclosed that the fraud covered the period 1995 to 1997 and that the cumulative overstatement of pretax quarterly earnings was approximately $300 million.…

the open, ignored, and pushed up to the top just waiting to come crashing down, as the standards becoming more and more confusing, while opportunity of fraud is evolving. Vogel (2001) researched titled “Cendant Corp: A Case Study Examining the Compensation and Accounting Issues Involved in a Stock-Option Repricing” regarding the Cendant’s compensation policy of stock-options, which is tie to the company’s performance (p.409). Vogel study on Cendant’s compensation policy identified that…

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