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Bankruptcy Essay

1260 words - 6 pages

Bankruptcy Examiner’s Report in Auditor Malpractice Suits
A bankruptcy examiner’s report may provide a roadmap to auditors’ negligence, breach of contract, gross negligence, and / or cooperation to cover up fraud committed by the debtor management. A bankruptcy examiner is appointed by the court to investigate the debtor and the debtor’s estate for the purpose to determine if fraud, dishonesty, misconduct, incompetence, and irregularity by the debtor management has occurred before and during the filing of the bankruptcy. The judge call for an examiner based on a request from the trustee, the creditors, major ...view middle of the document...

Third, the most important element of the investigation is the time span that it covers; most of these investigations extensively cover the period- one to two years- before the bankruptcy filing to understand and interpret the collaborated factors, circumstances, decisions, and transactions that led to the bankruptcy filing. Fourth, the examiner, then, has to answer the investigation main questions about the debtor honesty, solvency, off balance sheet liabilities, fraudulent transfers, adequate disclosure, and most important the concept of going concern. Fifth, in carrying out the responsibility of the investigation, the examiner cross references the findings to the Securities Exchange Commission’s rules and regulations, the Securities Act of 1933, the Securities Exchange Act of 1934, the Foreign Corrupt Act of 1977, Generally Accepted Accounting Principles in US, Generally Accepted Auditing Standards, and the rules and regulations that govern the Bankruptcy Code and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Considering the law and status of the State of filing are important as well.
Having said that, the examiner’s investigation is not a financial audit, and does not express any opinion about the materiality or the fairness of the presentation of the financial information. The bankruptcy process is for an honest debtor who failed under economic hardship and need protection to reorganize; the investigation is to provide evidence to that concept.
The examiner’s report contains and composes of several elements. One element is the statement of independency. The second is the composition of the examiner team and their qualifications and credentials including the examiner him or herself. The others elements varies from one examination to the other depending on the debtor case. However, most of the examination report includes an introduction section that reflects summary of the matter under investigation, scope of the investigation, and summary of the conclusion. The second section defines the process of the investigation by establishing the scope of the investigation, factors that influences the investigation, and the procedures aspects of the investigation. The third section reflects the business history of the debtor under investigation and its affiliates. The section traces, identifies, and verifies all financial transactions that include loans, bonds, issuing common stocks, transfers, distributions, sales, purchasing assets and / or liabilities. In a separate section about the role of professionals – auditors, tax accountant, and the corporate counsel-, the report defines the nature of the...

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