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Valley Commercial Corporation Case Study

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U.S. v. Simon, 1969 was one of the first major criminal cases successfully brought against auditors. Carl J. Simon was a senior partner in the internationally known accounting firm of Lybrand, Ross Bros., & Montgomery. Lybrand auditing firm was the independent auditor of Continental Vending Machine Corporation (Continental). Harold Roth was president, chairman of the board, and the controlling stockholder of Continental. He was also an officer and major stockholder of Valley Commercial Corporation (Valley), a firm that, for all practical purposes, he managed and controlled from a single office on Continental's premises. Valley Commercial Corporation was a finance company organized by Roth to finance various operations of Continental and other firms in the vending machine business. …show more content…

These transactions, beginning as early as 1956, gave rise to what is called the “Valley Payable." By the end of fiscal year of 1962, the amount of the outstanding Valley Payable was $1,029,475, of which $543,345 was due within the year. In addition to the “Valley Payable”, there was what is known as the "Valley Receivable", which represented that Continental made advances to Valley and Valley periodically made repayments to Continental. During the same period, Valley loaned money to Roth (the president of both companies) to finance his ventures in the stock market, and Roth regularly repaid Valley. By the end of fiscal year in 1962, the amount of the Valley receivable was $3.5 million, and by February 15, 1963, the date of certification, it has risen to $3.9

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