royed. Followed by a workers’ strike that halted toy shipments from Hong Kong. Finally, the recission of the early 1970's decreased sale for Mattel. “Mattel issued a press release stating that the company had undergone a dramatic turnaround in fiscal 1973 compared with fiscal 1972" (4). Shortly after, Albert Spear was hired to replace Rosenberg as executive vice-president. After reviewing the financial statements, he quickly noticed several misrepresentations. In actuality, Mattel had sustained an even bigger loss in 1973 as compared to 1972. As Spear revealed this to the public, stockholders and investors immediately sold their stock and filed lawsuits against Mattel. This led to an investigation by the Securities and Exchange Commission.Mattel’s outside directors issued a report stating, “ The company’s executive officers and key officials issued financial statements that were deliberately false and misleading to give an illusion of continued spectacular growth” (5). By the fall of 1975, the Handlers resigned from Mattel. Lawsuits against the company were settled, which left Mattel paying about $30 million and Arthur Anderson, who performed the audits in the early 1970's, paying $900,000 to stockholders. Ruth Handler did not have to serve a prison term, but was given 2,500 hours of community service and $57,000 fine. Elliot Handler was never indicted since he was not in direct connection with the fraud. Price Waterhouse reviewed and the SEC investigated the audits issued by Arthur Anderson during the early 1970's. Both criticized the audit techniques of Arthur Anderson and the lack of professional judgement in accumulating sufficient relevant data and evidence that prevented them from discovering “Mattel’s fraudulent earnings manipulation scheme” (5). The audits were conducted poorly, numerous errors were overlooked, inadequate tests were performed, and MattelR...
