BusinessBusiness RecoveryRefco scandal won’t hurt accountancy firm

Refco scandal won't hurt accountancy firm

Legal action costs will be absorbed, says Grant Thornton

Grant Thornton, the accountant facing lawsuit threats over the role it played
as auditor to Refco, has claimed that any legal costs incurred will be absorbed
thanks to the financially sound position of the firm.

Chief executive Edward Nusbaum said: ‘We anticipate the legal costs will be
expensive, as they are in every case. But Grant Thornton is very sound
financially and any legal costs will be absorbed by the firm.’

The number five accounting firm was the first to warn futures and commodities
broker, Refco, of ‘significant deficiencies’ in its internal controls before the
decision was made to float the company on the New York Stock Exchange in August.

Grant Thornton warned Refco that formal procedures for closing the books were
lacking and its finance functions were not large enough to meet reporting
demands.

The accountancy firm has defended its position, insisting that it was misled
by Refco management, including former CE Philip Bennett who is currently being
charged with fraud.

Edward Nusbaum continued: ‘We want to find out exactly what happened. I think
companies are judged by how they deal with these situations because, even with
Sarbannes-Oxley, there’s no guarantee of catching all fraud.’

Regulators and banks have now begun their attempt to salvage Refco after a
$430m bad-debt scandal triggered one of the fastest slides to insolvency of any
financial company.

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