Phar Mor Case Summary

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The Case of Phar-Mor Inc Phar-Mor Inc. was a discounted drug store that was established in 1982 as part of Giant Eagle. Phar-Mar would purchase large amounts of product for a good price, then sell at a discounted rate of up to 25% to 40% off retail price. Giant Eagle also owned Tamco Distributors Co. Michael J. Monus, the vice-president of Tamco, was promoted to be the president of the company. By 1987, Phar-Mor reached up to 70 drug stores and then by 1992, 5 years later the company extended to 310 stores. Phar-Mor grew to over 25,000 employees stretching over 34 states. (Phar-Mor Inc., History) The initial sign of financial issues came to light in 1988 when Phar-Mor was reporting a lower then expected profit margin. Phar-Mor’s accounts payable showed bills for inventory from Tamco that had not been received. Both Phar-Mor and Tamco kept very poor records so it was very difficult to track the inventory. In order for Phar-Mor to compete with Wal-Mart, they cut their prices so low that Phar-Mor was not longer making a profit. When the losses were reported Mickey Monus decided to use some imaginative accounting. He told his management that he had a quick fix to account for the loss and that in a couple months when they had time he would be able to fix his creative accounting. It is very possible that Mickey Monus did not realize just how bad his actions were. …show more content…

SOX requires the auditors to rotate, Title II section 203. If Phar-Mor had their auditors rotate they could have found the fraud much sooner. There is a good chance that the second auditor would not have gone along with fraud and brought it to light much sooner. (Final Rule,

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