At the turn of the new millennium, several countries experienced some of the largest corporate collapses in their history. Australia, for example, experienced its largest corporate collapse: that of HIH Insurance at the beginning of 2001. These led to significant regulatory and legislative reforms. Despite these reforms, in the late 2000s, there were more corporate failures and financial scandals reported in Australia. One of the prominent corporate collapses in the late 2000’s was of ABC Learning Centres, a childcare centre.

Task

Provide a brief overview of ABC Learning Centres (focusing on the nature of the operations, their business model, business risks that they would have faced and the inherent risks). Outline the major accounting issues that contributed to the collapse of the company. 

Did the auditor’s report reflect appropriately on the state of the financial affairs of the company (obtain and examine at least the last three years of the Company’s annual and auditor’s reports)? 

Analyse the role of auditors in the collapse of ABC Learning Centres. What consequences did the auditor (s) of ABC Learning Centres face? Briefly discuss the regulatory and legislative reforms that ensued the collapse of ABC Learning Centres in Australia.