Friday, July 19, 2013

WCG Not Vindicated by Arthur Andersen Audit in Receivership Crisis

Now let us see what Roderick C. Meredith, then head of the ministry, had to say in the June 25, 1979 Pastor's Report.

In his article he announces that he had successful meeting in Phoenix, Arizona. He and his wife, Sheryl, met Ramona and Herbert Armstrong in Tucson, Arizona.

Then he announces that Arthur Andersen's audit is nearly done and did not show anything illegal happened in WCG.

Actually in that sort of audit it was impossible for the auditors to assess the legality of anything, as is shown in Ambassador Report 33.

Arthur Andersen's auditors were solely concerned as to whether the church financial statements presented fairly the financial position of the WCG, the results of operations, and the changes in financial position in conformity with generally accepted accounting principles. (See the AR's lengthy article on this subject in our July 1984 issue, p. 4.) When Pastor Earle commented that "we direct people with any questions concerning our finances to our auditors, Arthur Andersen," he seemed unaware that the American Institute of Certified Public Accountants' Rules of Professional Conduct (sect. 301) prohibit a CPA from disclosing confidential client information except with the consent of the client. When Pastor Earle claims "nothing in the manner of the charges made against us was ever found," he again is unaware that "the CPA is usually not competent to determine if an act is illegal or likely to discover such an act" (The Complete CPA Examination Review - Auditing, 1984, p. 66). Furthermore, if a CPA discovers an illegal act while auditing a client's books, the "illegal act should be reported to a high enough level of management to take remedial action.... The CPA has no obligation to notify third parties" (ibid.). Indeed if he notified third parties or the general public, it would violate the rule of confidentiality.

Finally, it's important to remember that even big-name accounting firms are far from infallible. According to the April 1, 1985 issue of Business Week, since 1980 the nation's largest accounting firm, Arthur Andersen (the WCG's auditors), paid out over $137.1 million in settlement of audit-related lawsuits. That's more than seven times the amount any other CPA firm has had to pay in settlement of such suits.

So all that talk Meredith said praising this audit and saying it vindicated WCG is utter nonsense.

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