Page 18 - How Not To Cook The Books Article

Was it inevitable that the fraud would be found out?

Unwin and Ibbotson used fictitious asset valuation entries, in particular

the fake valuation of the Gem of Tanzania and two sham payments, to
conceal the true financial position of Wrekin Construction. The gem
might have stayed out of sight were it not for the recession. The
business ran out of money and the company was put into administration
and its assets lined up to be sold off. The answer may best be
illuminated by Warren Buffet :

It's only when the tide goes out that you learn who's been
swimming naked
- Warren Buffet (2007)

Any auditor worth their salt would have questioned the veracity of such a
unique asset in the accounts. However, Ashgates, appear to have

simply accepted the word of Wrekin’s management that the stone was
truly valued at £11 million. The question is - would a
national/international accountancy firm have been so ready to accept
such assurances? The answer is probably - No! This may be the reason
that the auditors were replaced.

The timing of the Wrekin acquisition could not have been worse,
occurring just as the financial crisis began to take effect. Contracts dried
up as businesses put construction on hold or abandoned them.