Question: 1 What conditions appear to have allowed the Parmalat situation

1. What conditions appear to have allowed the Parmalat situation to get out of control?
2. What specific audit procedures could have uncovered the Parmalat fraud earlier?
3. What audit steps should Deloitte have taken with regard to the seventeen off-shore subsidiaries that continued to be audited by Grant Thornton?
4. What impact will the Parmalat fraud have on Grant Thornton and on Deloitte & Touche?
5. How did the following areas of risk in Parmalat’s control environment contribute to the fraud: integrity and ethics, commitment, audit committee participation, management philosophy, structure, and authority?
6. How did thefollowing areas of risk in Parmalat’s strategy contribute to the fraud: changes in operating environment, new people and systems, growth, technology, new business, restructurings, and foreign operations?
7. Should the banks and other creditors be legally responsible for so-called irresponsible lending that contributes to higher than necessary losses? If so, how can they protect themselves when dealing with clients whose viability is in doubt?
8. Do you think that applying bankruptcy projection models should be a regular tool used by auditors, creditors and regulators to assess the reasonability of a company’s financial statements?
9. Is independence important in corporate governance? What are the most recent rules on corporate governance for public firms?
10. Discuss which changes could be made to Parmalat’s control system and corporate governance structure to mitigate the risk of accounting and business fraud in future years.

Parmalat Finanziaria S.p.A. and its subsidiaries manufacture food and drinks worldwide. Parmalat is one of the leading firms in the long-life milk, yogurt, and juices market. The company became the world’s seventh largest supplier of dairy products and Italy’s seventh largest company, with 146 plants in 30 countries, employing 36,000 people worldwide. In 2002, the company reported 7.6 billion euros in annual sales. In late December 2003, however, Parmalat was placed under administration and declared insolvent.

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