DEVELOPMENT OF MODERN AUDITING STANDARDS: THE STRANGE CASE OF RAYMOND MARIEN AND THE FRAUD AT INTERSTATE HOSIERY MILLS, 1934–1937 Available to Purchase

In February 1938, the police arrested Raymond Marien, a small, bookish man, for forging checks at Interstate Hosiery Mills, Inc. During the ensuing investigation, the New York Attorney General's office found that Marien had “juggled” the books of the corporation and that these accounting irregularities inflated Interstate Hosiery Mills' assets by $1.9 million or about 40% of the company's assets. In an irony of history, the company's external auditors, as it turned out, employed Marien. The extensive investigation conducted by the SEC into Marien's manipulations found that, save for forged checks amounting to about $2,000, Marien and others were exonerated from any financial gain in the fraud due to the increased value in Interstate's shares. In the end, the fraud and the SEC rulings would serve as a foundation of many modern accounting and auditing principles related to auditor independence, supervision, and management responsibility.