BROWSE

ZZZZ Best

What was the 'ZZZZ Best'

ZZZZ Best is a bankrupt company that was owned by Barry Minkow in the 1980s. Using forgery and theft, Minkow and his associates appeared to be building a multi-million dollar corporation. ZZZZ Best’s initial public offering (IPO) was in December 1986, and the firm reached a market capitalization of over $200 million before collapsing.

Explaining 'ZZZZ Best'

ZZZZ Best began as a carpet cleaning company started by Minkow in his parents' garage when he was in high school, and the business was never profitable. Minkow stole money from many different people over time and created the impression the cleaning business was profitable. A few years later, ZZZZ Best began to specialize in the insurance restoration business.

Factoring in an Appraisal Business

Minkow created a fictitious company, Interstate Appraisal Services, to create documents that fraudulently confirmed ZZZZ Best building refurbishing work for fire and water damage. The appraisal company generated documents to create the appearance that insurance companies hired ZZZZ Best to perform the restoration work. Both investors and bankers developed an interest in ZZZZ Best based on fraudulent financial statements produced by Minkow’s firm.

How Auditors Were Misled

For creation of an IPO, the Securities and Exchange Commission (SEC) requires a firm to compile a prospectus, and that document must include a set of audited financial statements. An independent CPA firm audited ZZZZ Best's financials to provide an opinion as to whether the financial statements were free of material misstatement.

Example of Other Fraud

Once the ZZZZ Best fraud was discovered, Minkow was convicted of fraud and sentenced to 25 years in prison. During his time in prison, he began to research and uncover other businesses that were doing business fraudulently and informing the federal government. Based on the dollar amount of fraud he eventually uncovered, Minkow’s sentence was reduced to just over seven years. After his release from prison, Minkow became a church pastor and was convicted in 2014 of embezzling $3 million from San Diego Community Bible Church by various means. His theft included stolen donations and an unauthorized church loan.


Further Reading


Ernst & Young Not Liable in ZZZZ Best Case
www.questia.com [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …

Called to account: fourteen financial frauds that shaped the American accounting professionCalled to account: fourteen financial frauds that shaped the American accounting profession
www.tandfonline.com [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …

On financial frauds and their causes: Investor overconfidenceOn financial frauds and their causes: Investor overconfidence
onlinelibrary.wiley.com [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …

US District Court Makes Summary Judgment RulingUS District Court Makes Summary Judgment Ruling
www.questia.com [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …

Earnings Management Practices in Financial Reporting of Public Enterprises in India: An Empirical Test with M-ScoreEarnings Management Practices in Financial Reporting of Public Enterprises in India: An Empirical Test with M-Score
papers.ssrn.com [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …

Investigative Assets: The CPA's Role in Detecting and Preventing FraudInvestigative Assets: The CPA's Role in Detecting and Preventing Fraud
heinonline.org [PDF]
Home » Browse » Academic journals » Finance and Accounting Journals » Journal of Accountancy … depression (in economics) The Columbia Encyclopedia, 6th ed., 2018. Read. FREE … Ron. Subjects: Accountants; Malpractice; Business Failures--Cases; ZZZZ Best Co.--Cases …



Q&A About ZZZZ Best


What happened after Barry convinced investors to give him money?

Investors gave him millions of dollars which allowed him to expand his business into many different states.

What does an audit provide an opinion on as to whether or not financial statements are free of material misstatement mean?

It means they are free from material misstatements, which means they are accurate and truthful.

What did Barry Minkow do to build his business?

He used forgery and theft.

Why did ZZZZ Best collapse?

Because of fraud.

What is ZZZZ Best?

ZZZZ Best was a bankrupt company that was owned by Barry Minkow in the 1980s.

Who audited the financial statements of ZZZZ Best before its IPO?

An independent CPA firm audited them.

How did he convince investors to give him more money after they invested in his company?

He lied about how much money he made from carpet cleaning and told them that it was very profitable so they would invest more money into his company.

When investigators went through all of the records from ZZZZ Best , what did they find ?

They found out that there were no records showing any profits earned from carpet cleaning .

How much money did ZZZZ Best make before it collapsed?

Over $2 million.

How long was Barry Minkow in prison for his crimes?

25 years.

Based on what you have learned about this case study, how would you describe the role of auditors in preventing frauds like this one from happening again in the future?

Auditors play a very important role in preventing frauds like this one from happening again because if someone were to try something similar, investors would be able to see through their lies and therefore prevent them from getting away with it for so long.

Where did all of the profit go if it wasn't being used on carpets ?

It went towards personal expenses such as cars, houses, boats, etc...

Who are the main characters in this story?

Barry Minkow and his company, ZZZZ Best.

What happened when the FBI investigated Barry's company because of complaints from customers who had not been paid for their work done at their homes or businesses ?

They found out that most of the profits were being used for personal expenses instead of paying back investors or doing carpets .

Why did Barry Minkow start a carpet cleaning business?

To make money for himself and his family.

How did he get started with ZZZZ Best?

He got started by convincing people that he was going to be a successful businessman.

Leave a Reply

Your email address will not be published. Required fields are marked *