Analysis of the Audit Report: Accounting Irregularities at MiMedx

Auditors and Regulatory Oversight
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Analysis of the Audit Report
One recent accounting scandal was perpetrated by MiMedx, which is a biotech company based in Georgia. On the 26th of November, the Securities and Exchange Commission charged the company for having engaged in fraudulent accounting practices (US Securities and Exchange Commission, 2019). Particularly, the Group, together with some three former executives, was accused of having defrauded investors by overstating the revenue of the company. The perpetrators were also accused of trying to cover up their fraudulent misconduct.
The legal liability of the company was pegged on going against the anti-kickback statute and related allegations. Additionally, the company also violated revenue management practices and laid out company recognition practices. According to the SEC, the company performed key accounting irregularities starting from the year 2013 all the way to 2017 (US Securities and Exchange Commission, 2019). First, they acknowledged sales to distributors that were yet to be effected. Consequently, they inflated their revenue. Additionally, the SEC found that some top executives engaged in side arrangements with some distributors and put in mechanisms to hide their steps. The top executives also misled both internal and external auditors. Outside lawyers who inquired about the transactions were also misled. Consequently, the accounting statements made did not were untrue and did not reflect the true financial status of the company.
Violation of the GAAS
One of the key generally accepted auditing standards violated was the legal liability to third parties. The correct audit of the firm illustrated that the internal control systems had key material weaknesses which negatively affected financial reporting. The misleading accounting statements made for the period highlighted (2013 to 2017) were misleading and misled third parties such as creditors, investors, and the government. According to GAAS, auditors are expected to demonstrate great care for the concerns and well-being of third parties.
Secondly, the GAAS requires auditors to state in their report whether the laid out standards were followed. The auditors, in this case, violated the GAAS by guaranteeing that their report was pegged on factual data and followed the laid down standards. In performing this irregularity, the auditors in MiMedx deceived investors concerning the true financial status of the company. Additionally, the management lied about the sales made by the company and continuously made attempts to cover their fraudulent behavior.
Management Vs. Auditor Responsib...