1) McKesson & Robbins scandal
McKesson & Robbins was a drug and chemical company in the mid-1920s that attracted the attention of Philip Musica, an individual with an unsavory past that included criminal acts and multiple fake names.
Musica purchased McKesson & Robbins in 1926 using the name F. Donald Coster and seeded the company with family members to help loot the company. The fraud involved fake purchase orders, inflated inventory, and skimming cash from company sales, and occurred despite the presence of Price Waterhouse as the company’s auditors. When the scam was finally detected in 1937, the SEC determined that $19 million in fictitious inventory was on the balance sheet—a sum equal to approximately $285 million in current dollars.
The McKesson & Robbins scandal had a profound impact on the accounting industry and led to the adoption of Generally Accepted Auditing Standards (GAAS), including the concept of an independent audit committee.