Campbell Soup CompanyBackgroundCampbell was founded shortly before the start of the Civil War. Abraham Anderson and Joseph Campbell began producing canned vegetables and fruit preserves. In 1976, Campbell bought out Anderson's interest and renamed the company the Joseph Campbell Preserving Company. Subsequently, Arthur Dorrance became Campbell's new partner. In the early 1920s, John Dorrance, grandson of Arthur Dorrance, was the sole owner of the Campbell Soup Company, which was the largest manufacturer of canned soups. Unfortunately, as the twentieth century drew to a close, the nation's appetite for condensed soup products was waning. Weakening demand has prompted company executives to use an assortment of questionable business practices and accounting schemes to improve the company's reported earnings. Campbell shareholders filed a series of lawsuits in the late 1990s. The alleged scams included commercial loading, improper accounting of loading discounts, shipping to the yard and guaranteed sales. The plaintiffs in the class action lawsuit filed against Campbell Soup Company and its top executives eventually added Pricewaterhouse (PwC), Campbell's independent auditor, as a defendant in the case. To allow a lawsuit brought under the Security Act of 1934 to proceed against a defendant, a federal judge must find that the plaintiffs have stated or "alleged" facts "to support a strong inference of scienter" by the defendant. After completing her review of PwC's audit workpapers, Judge Irenas determined that individually and collectively the plaintiff's allegations did not provide a sufficient basis to justify including the accounting firm as a defendant. Issue In this case, there are four questions to w..... . middle of the paper…accounting staff apparently never recorded adequate reserves for such sales returns. The plaintiffs accused PwC of knowing about Campbell's phony sales, but the judge dismissed this complaint. The reason was that PwC's role as Campbell's auditor is not sufficient to allow an inference that PwC was aware of these alleged deceptive practices. Summary In addition to learning about these four improper practices, as a plaintiff, if you intend to file a lawsuit against accounting firms, the evidence to charge them must be sufficient. PwC's auditors may be reckless, but they have not been added as defendants. Most of the charges against Campbell were dismissed by the judge only because the plaintiffs were unable to provide sufficient evidence and specifically highlight the facts. Furthermore, this case shows us a red flag regarding an unusual increase in sales towards the end of the accounting period.