The case of pharmor inc read the case of pharmor inc. Pharmor said the cumulative effect of the alleged fraudulent acts required the company to take a onetime writeoff of approximately. Pharmor to close two colorado stores denver business. Glover and others published finding auditors liable for fraud. But that opinion quickly changed when pharmor proved to be one of the largest fraud stories in american corporate history with. 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. 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.
How teachers and students can make the quick transition to online learning. At first phar mor was seen as a major prospect in the retail market. Sharon brown july 12, 2014 2 the case of phar mor inc. In 34 pages 12pt type, doublespacedsummarize the case and answer the following questions. In an unfolding scandal that threatens the companys survival, phar mor. As a result of the fraud and subsequent business failure, charges were filed against both phar mor s management and the companys auditors. He established this chain of stores in 1982 with the help of david shapira, the cofounder. Founded by michael mickey monus quickly grew to be the largest drug company in.
In ten years he had established 300 pharmor stores with 25,000 employees in 33 states. 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. As a result of the fraud and subsequent business failure, charges were filed against both phar mors management and the companys auditors. Ebscohost serves thousands of libraries with premium essays, articles and other content including the case of pharmor inc. What the jury heard in the pharmor case find, read and cite all. 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.
Phar mor inc established in 1982 phar mor was a small little known discount drugstore. The instant controversy arises out of the fraud and financial statement manipulation perpetrated by certain employees of phar mor, inc. Or the waste management scandal which did things such as capitalizing items which should have. However, that same year, pharmors top employees running the business were charged with embezzlement. President michael monus, chief financial officer patrick finn, vice president of finance jeffrey walley, controller stanley charelstein, and accounting. Accounting fraud at worldcom case solution and analysis, hbr. 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 phar mor had hired multiple former external auditors to seniorlevel positions within the financial departments of the company. Pharmor scandal case solution and analysis, hbs case study.
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. The case of pharmor inc ebsco information services. Ebscohost serves thousands of libraries with premium essays, articles and other content including the case of phar mor inc. 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 1947 the pharmor story up until 1992 mickey monus was considered one of americas great entrepreneurs. 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. 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. Accounting fraud at worldcom case solution and analysis. Pharmor scandal case solution and analysis, hbr case.
Pharmor drug stores initiated a quick growth of stores in very little time. According to the 2010 report to the nation by the association of. Reorganization proceedings are ongoing in the bankruptcy court. Who were the key individuals involved in pharmor scandal. Its time to take a new look at the auditing process semantic scholar. Corporate executives were hungry to report high earnings as well as fill their own pockets with rewards from. In order to fulfill the obligations of stewardship and reporting, management has to create a code of ethics. 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. The owners changed data and even fooled auditors who looked over the financial statements. Pharmor, shopko to merge in a complex transaction wsj. As a result of the fraud, phar mor and related entities filed voluntary petitions for relief under title 11 of the bankruptcy code. Pharmor inc established in 1982 pharmor was a small little known discount drugstore. Research the waste management scandal from the late 1990s.
Pharmor to close two colorado stores denver business journal. Abstract the purpose of this study is to understand the success and failure of pharmor, inc. Until a couple of weeks ago, everybody was comfortable with mickey monus. Pharmor scandal case solution step 2 assess risk factors. Mickey monus born 1947 is the former president of phar mor, inc. The case of phar mor inc current issues in accounting. Pharmor was known as one of the major discount chain retailers in the late 1980’s early 1990’s. Pharmor became well known for offering medications at a 2540% discount rate compared to your normal pharmacy store prices.
Pharmor scandal case solution and analysis, hbs case. The company was closed after a major fraud was discovered in the 1990s. Ethical obligations and decisionmaking in accounting. Two companies that have committed fraud by misstating inventory. Mor case, several members of top management confessed to, and were convicted of, financial statement fraud. A company suffering losses and therefore,uses inventory to finance its business might want to inflate the inventory balance. 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. Pharmor scandal case solution and analysis, hbr case study. Mickey monus born 1947 is the former president of pharmor, inc. Mar 23, 2011 finally, this blog will focus on the pharmaceutical industry. 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.
Phar mor became well known for offering medications at a 2540% discount rate compared to your normal pharmacy store prices. It started with 15 stores and grew to over 310 stores in thirty two states between 1985 and 1992. Unfortunately, the auditing firm assisted the organization with the conspiracy to defraud the users of financial reporting, the government, and the stakeholders. The role of managers attitudes in corporate fraud citeseerx. An investigation revealed that phar mor was not receiving all of the inventory they were being billed for by their sister company tamco. Pharmor pharmacies scandal by justin kierstead on prezi.
Pharmor was a major discount chain retailer that was founded by mickey monus. The employee thought it odd that pharmor would be paying the teams expenses. In an unfolding scandal that threatens the companys survival, pharmor. Defendants or equity plaintiffs are all equity investors in pharmor. 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. Pharmors president and ceo who has been sentenced to prison and fined for his part in the fraud. These actions have all been consolidated in this court by the multidistrict panel. Founded by michael mickey monus quickly grew to be the largest drug company in us 25,000 employees worldwide. In 34 pages 12pt type, doublespaced summarize the case and answer the following questions. Attitudes, fraud auditing standards, fraud triangle, corporate fraud, theory of planned. 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.
Pharmor was known as one of the major discount chain retailers in the late 1980s early 1990s. The case of pharmor inc was one of the biggest preenron frauds that have been uncovered. Michael mickey monus was the founder and president of pharmor drug stores. After the scandal was revealed, most of the stores were closed to cover up losses.
Aug 23, 1992 until a couple of weeks ago, everybody was comfortable with mickey monus. 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. 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. According to testimony provided in the pharmor inc. The fraud was conducted by the owner of the company, mickey monus and the whole management of the company was involved in it. Critics claim that finerty may have become too close to client management to maintain the professional skepticism necessary to conduct an independent audit. Phar mor scandal case solution step 2 assess risk factors. In 1992, pharmor was a successful pharmaceutical business with over 25,000 employees working in over 300 stores. Some of its stores used the names pharmhouse and rx place purchased in the mid1990s from the f. The plan to link phar mor s 102 deepdiscount drugstores with shopkos discount retail shops. Finally, this blog will focus on the pharmaceutical industry. Mar 23, 2011 however, that same year, pharmors top employees running the business were charged with embezzlement. Mor was a united states chain of discount drug stores, based in. 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.
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