HPL Technologies, Inc. (hereinafter referred to as HPL) is a software manufacturer in Silicon Valley, USA, founded in 1989, which is mainly engaged in personalized development, sales, after-sales consultation and maintenance of semiconductor software. On July 3rd, 2006, HPL sold 6.9 million shares at the price of 1 1 USD per share, and raised 75.9 million USD to be listed on Nasdaq. In the following three consecutive quarterly reports, HPL performed well, and its share price once climbed to 17.85 USD per share. However, the good times did not last long. One year after HPL went public, it was nailed to the stigma of financial fraud, and its stock was delisted by Nasdaq on July 29, 2002.

According to the investigation by the audit committee of HPL and the Securities and Exchange Commission (SEC), DavidLepejian, founder, chairman and CEO of HPL, fabricated more than $28 million in sales revenue in the five quarters before and after its initial public offering. After HPL's shares went public, he instructed the company's internal executives to take advantage of the rising share price to sell their 85,500 shares.

Compared with Enron, Xerox, WorldCom and other financial fraud cases, the scale of HPL fraud seems insignificant, but Lapeijian used various means to fabricate 80% of the sales revenue in the first year of listing, which was shocking. In the complaint against Le Peijian, the SEC disclosed his various fraudulent means in detail. To sum up, there are five main types: forging customer orders, forging shipping documents, modifying sales contracts, tampering with bank statements and forging inquiry letters. These methods are neither novel nor clever, but they easily fooled the famous PwC, which is really thought-provoking. The special feature of this case is that Le Peijian used a series of high-tech fraud methods when using the above means to fabricate sales revenue. Through these means, for more than a year, he dominated the world, deceiving shareholders and directors of the company and fooling certified public accountants. aspx >； Certified public accountants and financial personnel of HPL.

First of all, HPL financial fraud strategy

(1) Grafting and fictitious income

From 200 1, 1 to March 3, 2002/,Le Peijian forged dozens of purchase orders for Canon and Microelectronics for five consecutive quarters, with amounts ranging from 16 1 ten thousand dollars to 165438+ dollars. Since Canon and Microelectronics are two major customers of HPL and have long-term business contacts with them, Le Peijian, who is familiar with information technology, can easily extract the signatures of the responsible persons from the real orders with these two customers and paste them on the forged orders on the computer. Later, he modified the program of a fax machine in HPL and sent the forged order to another fax machine in HPL in the name of Canon and Microelectronics.

Only purchase orders are not enough to confirm sales revenue. According to American income standards and No requirements. The Office of the Chief Accountant 10 1 issued by the SEC, listed companies should meet four specific conditions when confirming their income: 1, and there is conclusive evidence to prove the existence of sales transactions; 2. Goods have been delivered or services have been provided; 3. The seller's costs and expenses can be measured reliably; 4. It is possible to recover the payment. In order to meet the basic condition of "the goods have been sent", Le Peijian then forged the delivery voucher: he drafted an email for each fake order and sent an email to HPL in the name of Canon and Microelectronics to confirm that the software sent by HPL had arrived at Canon and Microelectronics.

In addition to forging customer orders and shipping documents, Le Peijian, who is proficient in computer technology, forged Canon's sales supplementary agreement many times in 2002 to confirm the sales revenue of demonstration software in advance. The American Institute of Certified Public Accountants (AICPA) stipulated in its position statement SOP97-2 "Software Revenue Recognition" that software sales and service revenue should be recognized according to the relevant agreements signed between enterprises and customers, when the product development is completed, the recovery of accounts receivable and the customer's acceptance of products are not significantly uncertain. If it is a package software development agreement, the recognition of income should be shared among all products and services that the enterprise should provide; If there is no distribution basis, the relevant funds must be deferred until all products and services are completed before they can be recognized as income. Sabno. 10 1 also clearly stipulates that if the ownership of the delivered goods has been transferred to the buyer, but the essence of the transaction is consignment or fund-raising, even if the ownership of the goods has been transferred to the buyer, the sales revenue cannot be confirmed. Sabno. 10 1 also lists several situations in which sales revenue cannot be confirmed, including the situation of selling goods to the buyer for the purpose of demonstration. As an auditor of HPL, PricewaterhouseCoopers also judged that the sales revenue of demonstration software developed by HPL should be confirmed by stages within several years. However, if it is proved that the product has been sold to the final customer, HPL can confirm it in full according to the amount stipulated in the agreement when the second sale is completed. In 2002, HPL sold several demo software to Canon. In order not to embarrass the company's financial personnel and the CPA of PricewaterhouseCoopers, Le Peijian forged the certificate that Canon had sold all the demo software. The "complete" transaction voucher finally prompted HPL's financial personnel to confirm these fictitious transactions as "current" income.

It is through these simple but effective means of forgery and alteration that Le Peijian's fictitious sales revenue exceeded $28 million in five quarters, which is about four times the real sales of HPL in these five quarters.

(2) Deliberately covering up fraudulent acts

Accounting fraud and covering up fraud go hand in hand. According to the double-entry bookkeeping principle, false income will inevitably bring false accounts receivable and bank deposits. If we say that forging or altering orders and invoices is income fraud, then tampering with accounts receivable and bank deposit records is the subsequent cover-up of income fraud. In order to avoid the exposure of fraud conspiracy, Lapeijian deliberately tried to cover up fraud in the following four ways.

1, using company funds to pretend to be fictitious sales returns. In order to cover up the fact of fictitious sales revenue, Tesco has carefully designed a set of procedures to "recover" false accounts receivable. In September, 20001year, a subsidiary, HPL Japan, was incorporated in the name of the company. Then, he negotiated privately with Canon. Canon first bought HPL software for $3.2 million, and then Canon could sell the software to HPL Japan for $4 million. With this $800,000 price difference, Canon readily agreed. Of course, this kind of circular sales was completely covered up by Le Peijian. When Canon remitted US$ 3.2 million to HPL's account, Le Peijian explained that it was to recover some accounts receivable of Canon sold by HPL in the first three quarters of 2002, and asked the financial personnel to make corresponding accounting.

In order to cover up his fraud, Le Peijian scanned the bank statement submitted to him by HPL Japan into the computer, and deleted the transaction between HPL Japan and Canon with a photo program, so that his account balance was kept at $5 million when he was founded. Similarly, Le Peijian revised the quarterly and annual reports provided by HPL in Japan, and submitted the revised reports to HPL's financial personnel to prepare the consolidated report.

2. Use your advance payment to "recover" fictitious accounts receivable. In order to keep its fictitious sales income of $28 million intact, Le Peijian even used his personal funds as the recovery of fictitious accounts receivable. In September, 20065438 and June, 2002, he borrowed $3.3 million from his brokerage company as a pledge, deposited it in a friend's account and then transferred it to HPL's account. In March 2002, he borrowed $6,543,800+from his friends and deposited it in the account of HPL Company. Of course, Le Peijian will not forget to revise the bank statement to show that the three deposits came from Canon and Microelectronics respectively.

3. Tampering with the bank statements and statements submitted by HPL Japan, and fabricating a $9.2 million transaction to recover the fictitious accounts receivable. In April, 2002, Le Peijian tampered with the bank statement and quarterly report sent to him by Japanese HPL company again, and fabricated a commercial transaction between Japanese HPL company and Canon company with a total value of $9.2 million. Subsequently, he immediately instructed HPL's financial personnel to record the $9.2 million in the name of eight "sales receivables" collected from Canon in the first three quarters of 2002.

4. Forge letters of inquiry about accounts receivable and bank deposits to mislead and deceive certified public accountants. In the process of auditing the sales revenue of HPL, PricewaterhouseCoopers implemented the inquiry procedure of accounts receivable, but did not notice any problems, because Le Peijian provided carefully forged customer addresses and bank addresses. Results Canon, Microelectronics, PL and HPL Japan did not receive the confirmation letter from PricewaterhouseCoopers. The reply received by PricewaterhouseCoopers was actually a letter deliberately forged by Le Peijian and sent back by a modified HPL fax machine. Of course, these replies all claim that HPL's accounts receivable and bank deposit balances are correct.

What's even more ridiculous is that when the postal staff mistakenly sent the confirmation letter from PricewaterhouseCoopers to Canon's correct address according to the false address, Canon sent a letter to question and clearly pointed out that Canon only owed HPL $626,5438+0.8 million, not $65438+0.8 million as stated in the confirmation letter. Le Peijian, who was scared out in a cold sweat, hurriedly used up a [source: Paper World Paper Network to try to convince the financial director of HPL and CPA.aspx & gt CPA of PricewaterhouseCoopers that the confirmation letter was sent by mistake. Then, he quickly forged a letter from Canon, which read: The confirmation letter was sent to a branch of Canon, and Canon had no connection with HPL. In order to further convince PricewaterhouseCoopers' certified public accountants of this lie, Le Peijian specially arranged a conference call to let one of his friends pretend to be an official of Canon, and confirmed that the balance of sales accounts receivable of $65,438 +0 1.8 million was true.

Le Peijian's self-directed scam was exposed in July 2002. Shortly after HPL released its financial report for 2002, the board of directors of the company received an inquiry report from Canon's legal adviser. The report pointed out that most of the money transactions between Canon and HPL did not exist, and asked why HPL did not pay due attention to the fact that the amount of their inquiry letter was not true. At this point, Le Peijian's plot was completely exposed.

Second, the revelation of HPL financial fraud case

Cases similar to HPL may also appear in listed companies in China. In the IPO stage, executives of listed companies are faced with various performance pressures, and they urgently need fictitious sales revenue to beautify their business performance. However, in the IPO stage, the reorganization company lacks internal control system such as "checks and balances", which often provides opportunities for its executives to engage in financial fraud. With the development and popularization of computer technology, the business operation of enterprises and paperless operation of accounting information systems are becoming more and more popular. Perhaps one day, some "masters" of these enterprises may be more "thoughtful" than Le Peijian. In view of this change in the audit environment, certified public accountants should keep a high degree of vigilance against the possible fictitious sales income behavior, and implement more detailed audit procedures based on the principle of prudent practice to prevent audit failure.

Revelation 1: Beware of the "verification trap" and advocate seeing is believing.

Strengthening the audit of accounts receivable and bank deposits, especially through the implementation of inquiry procedures, is an effective means to find false income. However, the HPL case shows that CPA can easily fall into the "evidence-seeking trap" set by the audited entity. Conventional evidence collection procedures do have limitations. For example, a certified public accountant usually sends an inquiry letter according to the address provided by the audited entity. If the audited entity does not provide the real address, the inquiry procedure may be completely invalid.

Therefore, when obtaining the address provided by the audited entity, the certified public accountant should maintain due professional caution. For accounts receivable, certified public accountants should check the name and address of customers provided by the audited entity with relevant records (such as the records on sales invoices). In addition, you should also call or email in person to ask whether the respondent has received the confirmation letter and whether the reply letter has been sent; After obtaining the reply from the electronic media, the certified public accountant should also provide a written reply, keep the reply envelope as audit evidence, and pay full attention to the source of the reply. In order to avoid being deceived, certified public accountants can also obtain addresses, e-mails, fax numbers, telephone numbers, etc. Inquire from the audited entity through other channels (such as the Internet) and check with the relevant inquiry address provided by the audited entity. If the verification results are different, certified public accountants should be alert to the existence of fraud in the audited units.

It is worth noting that if the respondents reply by fax, email, etc. Because its content and source may be tampered with, certified public accountants should not only receive it directly, but also ask the respondents to send back the original confirmation letter before the date of the audit report.

Revelation 2: Keep in mind that "cash is king" and identify the authenticity of documents.

"Cash is king" is a creed in financial management and a wise saying in auditing. Paying attention to the audit of monetary funds is a shortcut to find clues of financial fraud such as false income. Bank deposit is an important part of enterprise assets. The cash sales income of enterprises and the recovery of accounts receivable on credit are their two major sources. Therefore, whether the balance of bank deposits is true or not will also prove the authenticity of the sales revenue of enterprises from another aspect.

Obtaining bank statements and other documents is the standard evidence collection procedure for certified public accountants to examine bank deposits. However, the HPL case shows that with the increasing sophistication of modern fraudulent means, bank documents belong to external evidence circulating within the audited entity, and their reliability should be carefully evaluated, and they must not be confused by seemingly real seal signatures and computer records. The confirmation of the balance of deposits in major banks should be based on the inquiry procedure. In order to ensure the validity of the inquiry and avoid the audited entity using high-tech means to tamper with, alter or forge bank statements and other documents, certified public accountants should seek the cooperation of the audited entity, and should personally go to the bank to inquire and prove important and abnormal bank accounts.

Enlightenment 3: Pay attention to "logistics information" and avoid "paying more attention to accounts than things"

Tracing the perpetual inventory record of inventory and paying attention to the physical circulation of enterprises are also important means to find false sales income. Many cases of financial fraud show that "paying more attention to accounts than things", attaching importance to financial information and ignoring logistics information, will easily lead to audit failure. In order to determine the authenticity of sales revenue, the main audit procedure usually implemented by certified public accountants is to review the accounting records of large or abnormal transactions in the subsidiary ledger of main business revenue, and trace them back to the corresponding original documents such as sales contracts, sales invoices and shipping documents. However, if the above-mentioned vouchers are carefully forged, as described in the HPL case, the carnal CPA may not find any problems.

Therefore, when certified public accountants doubt the authenticity of particularly important sales transactions or original documents (such as shipping documents, etc.). ), it is necessary to further trace the perpetual inventory record of inventory and test the authenticity of inventory balance. Fictitious sales revenue is generally not accompanied by real inventory circulation, so random inspection of inventory records can often effectively expose false sales revenue.

Revelation 4: Instead of "losing big because of small", it is better to "stay near and seek far"

Generally, listed companies have quite a few subsidiaries, which are widely distributed in the region. When auditing such companies, certified public accountants often "stay away from the near" or even omit the auditing procedures for some unimportant subsidiaries on the grounds of "great significance", or only assign a few inexperienced "novices" to audit the subsidiaries of the audited units. Some accounting firms did not assign certified public accountants to their subsidiaries to conduct on-site audits at all, but only used some simple procedures such as current account and bank deposit inquiry instead. Certified public accountants do not pay enough attention to the audit of subsidiaries, and are often used by audited units with ulterior motives. The biggest mistake of PricewaterhouseCoopers in HPL audit is that it did not send certified public accountants to HPL Japan for audit. At present, it and HPL's agent are facing a civil compensation lawsuit of $ 1 billion.

Another revelation of the HPL case is that in order to prevent the audited entity from using some seemingly unimportant subsidiaries to engage in financial fraud, certified public accountants should adopt unconventional auditing methods, combine professional judgment, "keep close to the future" and strengthen the audit of subsidiaries. Criterion No.99 "Consideration of Auditing Fraud in Financial Statements" issued by AICPA on June 5438+065438+ 10, 2002 clearly requires certified public accountants to carry out unconventional auditing procedures, especially for the subsidiaries, workplaces and accounts that the audited units did not expect to check, because they realized that many audited units had "understood" the "mentality" of certified public accountants and "

Revelation 5: Pay attention to "controlling malposition" and deal with the paperless trend.

Paperless accounting information system is very different from manual accounting system in transaction authorization and execution. The most typical difference is that in the manual system, every link of an economic business has to be authorized and signed by some people with corresponding authority, while in the paperless accounting system, employees can use special authorization documents or passwords to obtain certain authority or run specific procedures for business processing, which leads to a large number of cases of system out of control or "control abuse" and eventually leads to fraud. HPL is a typical case. Le Peijian, as the founder, chairman and CEO of HPL, controls the operation codes of internal control modules, so that he can easily enter and leave each module and forge and tamper with accounting and business data at will.

Therefore, certified public accountants should pay attention to the understanding and testing of internal control of enterprises when auditing paperless accounting information systems. Special attention should be paid to understanding and testing some control procedures in system operation (such as network system security control, system authority control and modification program control, etc.). ), and cooperate with computer experts when necessary. Especially in industries such as finance, insurance and securities, which are highly dependent on computer information systems to process business and accounting data, if the audit team is not equipped with experts who are proficient in computer systems, certified public accountants may only audit the information carefully combed by computer systems in a formal way, but they will not be able to find out that the audited units use high-tech means to commit fraud. [ lunwentianxia.com ]