ARTICLE REVIEW

May 9, 2019

ARTICLE REVIEW

After reading the article, respond to the following questions

1.Highlight some of the red flags that stakeholders should have been aware of. Why do you think so many investors ignored the red flags? What part did the auditors play?

2.Elaborate on exactly what Petters and his employees were doing with physical inventory and the recording of inventory. How were lock boxes used by Petters and the banks? These schemes should have been uncovered by many players. Comment on how professional skepticism is essential in an accountant’s professional life.

Answer preview
Although many Ponzi schemes are structured in a way to deceive and blind the stakeholders, that is, not to have an idea of what is being concealed, there are some red flags that the stakeholders in Tom Petters case need to have been aware of. First, stakeholders have the responsibility to approve the financial statement of the company. In this regard, they could have been aware of the fabricated documents that listed goods believed to have been bought by PCI from various vendors and then sold to retailers (Blake, 2011). The extraordinary high guaranteed returns promised were also supposed to offer as a warning to the stakeholders…
(400 words)