This week, there were sev­er­al major devel­op­ments in the State of New York’s ongo­ing inves­ti­ga­tions into Don­ald Trump’s alleged ille­gal dealings.

In addi­tion to being ordered to tes­ti­fy under oath in a rul­ing issued today by State Supreme Court Judge Arthur F. Engoron along with two of his chil­dren — a deci­sion that his attor­neys will no doubt prompt­ly appeal — Don­ald Trump lost the ser­vices of his long­time account­ing firm, Mazars USA.

Mazars declared in a let­ter dat­ed Feb­ru­ary 9th that it would imme­di­ate­ly and with effect with­draw from all present and future engage­ments with the Trump Orga­ni­za­tion, instruct­ing them to con­tact, dis­close prob­lems with, for­mal­ly retract exist­ing finan­cial state­ments, and pro­vide updat­ed finan­cial state­ments to all users of their finan­cial state­ments made between 2011 and 2020.

While the firm had not “as a whole” found mate­r­i­al dis­crep­an­cies between the infor­ma­tion the Trump Orga­ni­za­tion pro­vid­ed and the actu­al val­ue of Mr. Trump’s assets, giv­en what it called “the total­i­ty of cir­cum­stances” — includ­ing Mazars USA’s own inves­ti­ga­tion — the let­ter direct­ed the Trump Orga­ni­za­tion to noti­fy any­one who received the state­ments that they should no longer rely on them.

Mazars USA also stat­ed that it has a non-waiv­able con­flict of inter­est pro­vi­sion that requires them to with­draw from the engagement.

The trig­ger of the clause was the dis­cov­ery that it was not giv­en accu­rate assess­ments of val­ue by the Trump Orga­ni­za­tion, per recent dis­clo­sures by the New York State Office of the Attor­ney Gen­er­al, which had pre­vi­ous­ly sub­poe­naed Mazars USA for their records and tes­ti­mo­ny, and thus has too great a con­flict of inter­est to con­tin­ue with the Trump Orga­ni­za­tion as a client.

The let­ter to the Trump Orga­ni­za­tion stat­ing its inten­tions and rec­om­men­da­tions was made pub­lic in a fil­ing by the Office of the New York Attor­ney General.

It dis­closed the let­ter on Feb­ru­ary 14th, in sup­port of its fil­ing before the New York State Supreme Court to enforce sub­poe­nas for Don­ald J. Trump, Ivan­ka Trump, and Don­ald J. Trump Jr.

“As the most recent fil­ings demon­strate, the evi­dence con­tin­ues to mount show­ing that Don­ald J. Trump and the Trump Orga­ni­za­tion used fraud­u­lent and mis­lead­ing finan­cial state­ments to obtain eco­nom­ic ben­e­fit,” New York State Attor­ney Gen­er­al Leti­tia James said in a state­ment. “There should be no doubt that this is a law­ful inves­ti­ga­tion and that we have legit­i­mate rea­son to seek tes­ti­mo­ny from Don­ald J. Trump, Don­ald J. Trump Jr., and Ivan­ka Trump.”

Mazars USA was act­ing in accor­dance with AICPA pro­fes­sion­al stan­dards, specif­i­cal­ly the AICPA Clar­i­fied State­ments on Audit­ing Stan­dards AU‑C Sec­tion 560, Sub­se­quent Events and Sub­se­quent­ly Dis­cov­ered Facts. This states that when a mem­ber firm dis­cov­ers mate­r­i­al sub­se­quent events and facts, it should:

• Dis­cuss the mat­ter with client man­age­ment.Deter­mine if the finan­cial state­ments, includ­ing dis­clo­sures, require revi­sion and, if so, inquire how man­age­ment intends to address the mat­ter in the finan­cial state­ments. Involve those charged with gov­er­nance when appropriate.
• Ensure third-par­ty users are noti­fied. If the finan­cial state­ments (before nec­es­sary revi­sion) have been made avail­able to third par­ties, client man­age­ment, not the audi­tor, should inform the users of the sit­u­a­tion and advise them not to rely on the finan­cial state­ments and relat­ed audit report. The audi­tor should ver­i­fy that the client has pro­vid­ed ade­quate notice to third par­ties. Time­ly and appro­pri­ate noti­fi­ca­tion to third-par­ty users rep­re­sents a crit­i­cal step in mit­i­gat­ing the risk of a pro­fes­sion­al lia­bil­i­ty claim.
• Audit the new infor­ma­tion. The audi­tor should audit how the client has account­ed for the new infor­ma­tion and reflect­ed it in the finan­cial state­ments and relat­ed notes.
• Update and reis­sue the audi­tor’s report.If the audit opin­ion dif­fers from the orig­i­nal­ly issued opin­ion, an empha­sis-of-mat­ter para­graph or oth­er-mat­ter para­graph should be added to the report. The audi­tor then has two choic­es relat­ed to the date of the reis­sued audit report: 
  • Date the report as of a lat­er date. Extend sub­se­quent-event pro­ce­dures and obtain client man­age­ment rep­re­sen­ta­tions through the new report date.
  • Dual-date the report. A note to the finan­cial state­ments should dis­close the new finan­cial infor­ma­tion and the finan­cial state­ment impact and include a state­ment that audit pro­ce­dures applied sub­se­quent to the orig­i­nal audit report date were lim­it­ed sole­ly to the revised finan­cial infor­ma­tion. Addi­tion­al man­age­ment rep­re­sen­ta­tions should also be obtained in this circumstance.

Clients pro­vide assess­ments of val­ue, also known as rep­re­sen­ta­tions, to accoun­tants, which must large­ly accept the infor­ma­tion pre­sent­ed by the client at face val­ue — there is no attes­ta­tion required, though one can be vol­un­tar­i­ly pro­vid­ed.  The accoun­tant then pro­vides “com­pi­la­tion ser­vices” which trans­late rep­re­sen­ta­tions into a finan­cial state­ment. The accoun­tant does not typ­i­cal­ly audit rep­re­sen­ta­tions pro­vid­ed as part of its com­pi­la­tion services.

The com­piled finan­cial state­ment is then the basis for local, state, and fed­er­al tax returns, but they by them­selves aren’t guar­an­teed effec­tive in detect­ing fraud.

The infa­mous Enron and World­com account­ing decep­tions, which last­ed sev­er­al years, were per­pe­trat­ed by cor­po­rate offi­cers with com­pli­ance depart­ments and were pub­licly trad­ed com­pa­nies required to pro­vide either an exter­nal attes­ta­tion or an audit by an account­ing firm.

Trump did not per­son­al­ly assem­ble the data for the accoun­tants, but as was writ­ten in a cov­er let­ter attached to the state­ments in 2011 and 2012, “Don­ald J. Trump is respon­si­ble for the prepa­ra­tion and fair pre­sen­ta­tion of the finan­cial state­ment in accor­dance with account­ing prin­ci­ples gen­er­al­ly accept­ed in the Unit­ed States of America.”

The fact that mate­r­i­al mis­state­ments and omis­sions were delib­er­ate­ly includ­ed in the finan­cial state­ments by the Trump Orga­ni­za­tion is a com­mis­sion of fraud.

It is fur­ther evi­dence that sup­ports the con­tention that Don­ald Trump lies to every­one and oper­ates his fam­i­ly busi­ness as a crim­i­nal enterprise.

This sup­ports exist­ing fraud and con­spir­a­cy charges against the Trump Orga­ni­za­tion and the three Trump fam­i­ly mem­bers for inflat­ing the val­ue of their assets to obtain out­sized loans, under­pay­ing income and employ­ment tax­es by fil­ing fraud­u­lent tax returns, and manip­u­la­tion of the val­ue of their assets to suit their needs at any giv­en moment.

This expo­sure goes straight to Don­ald J. Trump, and this is why he fought so hard to hide his tax and account­ing records.