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This is a case study of Aegean Marine Petroleum Network, Inc. (Aegean). Aegean’s founder and former CEO was the mastermind of several fraud schemes which pilfered $300 million from the company. During 2006-2018, Aegean’s Big 4 auditors, Deloitte and Price Waterhouse, failed to detect the fraud and issued clean, unqualified opinions year after year. After the fraud was discovered by Aegean’s audit committee in 2018, a group of Aegean’s stockholders filed a securities fraud lawsuit in New York City against the former CEO and the two auditors, and it will come to trial in the near future. U.S. Public Company Accounting Oversight Board (PCAOB) standards require an auditor to be professionally skeptical during an audit. He must maintain a questioning mind and make a critical objective assessment of audit evidence. In the Aegean case, the court held if the auditors had been more professionally skeptical, they may have been able to discover the massive fraud. PCAOB standards also require an auditor to search for related party transactions and to disclose them. In the Aegean case, the court noted it is inexcusable that the auditors were not aware that the former CEO owned Oil Tank, Inc., a firm which siphoned off millions of dollars from Aegean during the oil storage facility construction project. If they had been aware of this relationship, they might have been able to uncover the massive fraud. PCAOB standards also require an auditor to search for fraud. In the Aegean case, the former CEO engaged in several fraud schemes, yet the auditors were ignorant of them and issued unqualified audit opinions. This led the court to conclude that the auditors exhibited “willful blindness.”

journal of economics, finance and management studies

Auditors’ Duty To Detect Related Party Transactions, To Be Professionally Skeptical, and To Detect Fraud: A Case Study of Aegean Marine Petroleum Network, Inc.