At first pharmor was seen as a major prospect in the retail market. Accounting fraud at worldcom case solution,accounting fraud at worldcom case analysis, accounting fraud at worldcom case study solution, introduction worldcom was formed in 1983 and was a multibillion dollar company in the telecommunications industry. Text and cases by steven mintz ebook pdf instant download. The company was closed after a major fraud was discovered in the 1990s. The fraud was conducted by the owner of the company, mickey monus and the whole management of the company was involved in it. Ethical obligations and decisionmaking in accounting.
President michael monus, chief financial officer patrick finn, vice president of finance jeffrey walley, controller stanley charelstein, and accounting. Accounting fraud, litigation, and auditor liability dexter arrington tracey clements daniel hughes alisha royal hunter shelnutt acct 44201 professor penny howard september 24, 2012 benefits and troubles of hiring former external auditors pharmor had hired multiple former external auditors to seniorlevel positions within the financial. Mar 23, 2011 however, that same year, pharmors top employees running the business were charged with embezzlement. Abstract the purpose of this study is to understand the success and failure of pharmor, inc. Some of its stores used the names pharmhouse and rx place purchased in the mid1990s from the f. Founded by michael mickey monus quickly grew to be the largest drug company in us 25,000 employees worldwide. Although the bankruptcy occurred 10 years prior to the enactment of sox, this article attempts, with hindsight, to determine if the bankruptcy might have been prevented if the provisions of sox had been in effect and applied to pharmor inc. Ebscohost serves thousands of libraries with premium essays, articles and other content including the case of pharmor inc. A company suffering losses and therefore,uses inventory to finance its business might want to inflate the inventory balance.
As a result of the fraud and subsequent business failure, charges were filed against both phar mor s management and the companys auditors. According to testimony provided in the pharmor inc. Although the bankruptcy occurred 10 years prior to the enactment of sox, this article attempts, with hindsight, to determine if the bankruptcy might have been prevented if the provisions of sox had been in effect and applied to phar mor inc. The case of pharmor inc ebsco information services. Unfortunately, the auditing firm assisted the organization with the conspiracy to defraud the users of financial reporting, the government, and the stakeholders. An investigation revealed that phar mor was not receiving all of the inventory they were being billed for by their sister company tamco. Fraud will always be an issue but was more so in the past before there were any real guidelines that companies and accountants had to adhere to. In 34 pages 12pt type, doublespacedsummarize the case and answer the following questions. Mor case, several members of top management confessed to, and were convicted of, financial statement fraud. Mar 23, 2011 finally, this blog will focus on the pharmaceutical industry. Pharmor inc established in 1982 pharmor was a small little known discount drugstore. Corporate executives were hungry to report high earnings as well as fill their own pockets with rewards from. The case of phar mor inc current issues in accounting. Pharmor to close two colorado stores denver business.
One example is a case such as pharmor which fabricated their inventory in most of their retail stores in order to conceal a massive fraud by the leading executives. These actions have all been consolidated in this court by the multidistrict panel. The case of phar mor inc was one of the biggest preenron frauds that have been uncovered. According to the 2010 report to the nation by the association of. In an unfolding scandal that threatens the companys survival, pharmor.
What the jury heard in the pharmor case find, read and cite all. In 34 pages 12pt type, doublespaced summarize the case and answer the following questions. Finally, this blog will focus on the pharmaceutical industry. It was founded by mickey monus, a gambler in nature, who with the help of senior management was cooking the books for years to cover up his loses. Pharmors president and ceo who has been sentenced to prison and fined for his part in the fraud. Mickey monus born 1947 is the former president of pharmor, inc. The case of pharmor inc was one of the biggest preenron frauds that have been uncovered.
It started with 15 stores and grew to over 310 stores in thirty two states between 1985 and 1992. Until a couple of weeks ago, everybody was comfortable with mickey monus. Phar mor scandal case solution step 2 assess risk factors. At first phar mor was seen as a major prospect in the retail market.
But that opinion quickly changed when pharmor proved to be one of the largest fraud stories in american corporate history with. The two men most responsible for the scandal occurring was the coo, michael monus, and the cfo, patrick finn. In the phar mor fraud case, management did not write or adopt a code of ethics. Glover and others published finding auditors liable for fraud. Reorganization proceedings are ongoing in the bankruptcy court. As a result of the fraud and subsequent business failure, charges were filed against both phar mors management and the companys auditors. Research the waste management scandal from the late 1990s. Pharmor was a major discount chain retailer that was founded by mickey monus. Assignment week 1 the case of pharmor inc devry university acct 52515768 january 12, 2014 abstract the sarbanesoxley act of 2002 was implemented with the sole purpose of assuring the investors in the financial reporting system. Attitudes, fraud auditing standards, fraud triangle, corporate fraud, theory of planned. The case of pharmor inc read the case of pharmor inc. Mickey monus 1947 the pharmor story up until 1992 mickey monus was considered one of americas great entrepreneurs.
Pharmor, shopko to merge in a complex transaction wsj. Pharmor was known as one of the major discount chain retailers in the late 1980’s early 1990’s. Assignment week 1 the case of phar mor inc devry university acct 52515768 january 12, 2014 abstract the sarbanesoxley act of 2002 was implemented with the sole purpose of assuring the investors in the financial reporting system. However, that same year, pharmors top employees running the business were charged with embezzlement. Pharmor pharmacies scandal by justin kierstead on prezi. Sharon brown july 12, 2014 2 the case of phar mor inc. In order to fulfill the obligations of stewardship and reporting, management has to create a code of ethics. Phar mor inc established in 1982 phar mor was a small little known discount drugstore.
The role of managers attitudes in corporate fraud citeseerx. Pharmor scandal case solution and analysis, hbr case study. Michael mickey monus was the founder and president of pharmor drug stores. Who were the key individuals involved in pharmor scandal.
Pharmor scandal case solution step 2 assess risk factors. Or the waste management scandal which did things such as capitalizing items which should have. In 1992, pharmor was a successful pharmaceutical business with over 25,000 employees working in over 300 stores. After the scandal was revealed, most of the stores were closed to cover up losses. Pharmor became well known for offering medications at a 2540% discount rate compared to your normal pharmacy store prices. Classic case studies in accounting fraud ohiolink etd. Risk factors include attempts to gain funds secured by inventory and risk arises if inventory balance is unusually high. One example is a case such as phar mor which fabricated their inventory in most of their retail stores in order to conceal a massive fraud by the leading executives. In addition to the bankruptcy proceedings, the pharmor fraud has also given rise to a number of civil suits filed by creditors and equity investors of pharmor against coopers and others.
In the early 2000s, companies such as enron and worldcom participated in the some of the biggest accounting scandals the industry has seen. Mickey monus born 1947 is the former president of phar mor, inc. Critics claim that finerty may have become too close to client management to maintain the professional skepticism necessary to conduct an independent audit. How teachers and students can make the quick transition to online learning. Defendants or equity plaintiffs are all equity investors in pharmor. Pharmor scandal case solution and analysis, hbr case. Accounting fraud at worldcom case solution and analysis. Pharmor to close two colorado stores denver business journal. Pharmor scandal case solution and analysis, hbs case study. The plan to link phar mor s 102 deepdiscount drugstores with shopkos discount retail shops. Pharmor scandal case solution and analysis, hbs case. The employee thought it odd that pharmor would be paying the teams expenses. Accounting fraud at worldcom case solution and analysis, hbr. Mor was a united states chain of discount drug stores, based in youngstown, ohio, and founded by michael mickey monus and david shapira in 1982.
Two companies that have committed fraud by misstating inventory. Ebscohost serves thousands of libraries with premium essays, articles and other content including the case of phar mor inc. As a result of the fraud, phar mor and related entities filed voluntary petitions for relief under title 11 of the bankruptcy code. In ten years he had established 300 pharmor stores with 25,000 employees in 33 states. Its time to take a new look at the auditing process semantic scholar. This casebook contains a collection of 49 auditing cases plus a separate learning module about professional judgment that allow the instructor to focus and deepen students understanding in each of the major activities performed during the conduct of an audit. Founded by michael mickey monus quickly grew to be the largest drug company in. Pharmor was known as one of the major discount chain retailers in the late 1980s early 1990s. In an unfolding scandal that threatens the companys survival, phar mor. The owners changed data and even fooled auditors who looked over the financial statements. Phar mor became well known for offering medications at a 2540% discount rate compared to your normal pharmacy store prices. The instant controversy arises out of the fraud and financial statement manipulation perpetrated by certain employees of phar mor, inc.
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