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Audit Individual Assignment

In: Business and Management

Submitted By caitlin828
Words 1662
Pages 7
MEMO
To: Andrey Simonov
From: Caitlin Doonan
Subject: ZZZZ Best
-------------------------------------------------
Date: October 10, 2013

ZZZZ Best Company, Inc., a carpet cleaning and restoration company became the illegitimate business front for one of the largest investment frauds in American history. Barry Minkow started working in the cutthroat carpet cleaning industry at a young age. A risky Minkow began perpetrating frauds on a small scale and eventually took his Ponzi scheme public. Red flags went unnoticed from banks, investors, and auditors. Crucial auditor mistakes postponed the uncovering of Minkow’s scam. ZZZZ Best, Inc. significantly impacted both the accounting and auditing industry both in practice and standards.

Barry Minkow founded ZZZZ Best Company at the age of sixteen. Minkow’s exposure to the carpet cleaning industry came from his mother. She answered phones and conducted clerical work for a carpet cleaning company in the San Fernando Valley of California (Knapp). The carpet cleaning industry required very little start-up capital, even less experience, and no licensing requirements. These attributes enticed Minkow, a young entrepreneur, to start his own company.. However, the competition in the carpet cleaning industry made it difficult for Minkow to make profitable sales. Vendors wanted money from Minkow and sales were not enough to cover his costs. Banks refused to loan him money because his company barely made a profit (Knapp). These financial struggles Minkow incurred led him to perform illegal acts to make ends meet. He stole jewelry from his mother, staged break-ins to collect insurance claims, committed credit card fraud, and wrote bad checks to make ends meet (Knapp).

Barry Minkow turned to even riskier scams when the income from his “small-scale” scams was not enough. Minkow befriended Tom Padgett to expand his…...

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