Review of Article - Essay Example

Article Review This article is a comprehensive review of accounting fraud committed by Life Partners Holdings Inc as was undertaken by The Securities and Exchange Commission. The fraud as covered by the article involved misleading information and documents, which were backdated being given to auditors. There were a number of ethical issues and accounting mistakes that were committed in the running of the firm as was disclosed in the article. Among the frauds committed by the top executives included insider trading whereby shares were traded at unfairly high prices in regard to the true financial position of the firm.

It was revealed that the firm gave wrong estimates of the life expectancy of its clients (the people it insured) and as a result if the clients lived longer than they were expected (and 90 percent of them outlived their expectancy) this could turn out to be a loss to the investors. The firm is said to have obtained its information on its clients’ life expectancies from a doctor, who was not sufficiently experienced in such matters. It was quite incriminating that the company was well aware that the doctor’s estimates were awfully wrong.

The company CEO treated the firm as a personal item since records showed that he owned over half of the firm’s stocks and that the firm at times hired his airplane and yacht for business functions. Some of the ethical and accounting mistakes which were revealed by this article included:Basing financial decisions on sources of information which were not credibleNot taking remedial actions even when the result of the mistakes committed surfacedThe firm engaged in cover up of very significant information through LE fraud which made the company appear as if it were delivering “double digit returns”Conflict of interest was evident as Mr.

Pardo, the CEO of the firm, owned over half of the firm’s stock.