About 30 years ago (1975), My firm was in the midst of a due diligence evaluation of a deal where a manufacturer was seeking to sell and leaseback its entire facility, process equipment as well as real estate. Our client was an investor consortium willing to put up $50,000,000 for the deal, subject to my firm's "fairness opinion" attesting the deal was fair for both investors and the stockholders of the manufacturer. In effect, we were in the position of a third party auditor/registrar, since we were paid a flat fee, not contingent on whether the deal closed or not.
For those unfamiliar with the concept, due diligence absolutely considers factors such as conformance to government regulations (including zoning and life, health, safety items), dollar and cents equivalents of real estate and equipment, projected financial risks as to whether the manufacturer has good prospects of remaining in profitable business at the location, determining the funds will be used for the avowed purpose and not siphoned off to the detriment of the company that will be the tenant, labor relations, and a multitude of other factors.
The process on this deal took a team of 12, including experts in several fields, putting together individual reports which would be assembled into a final omnibus report for the parties to the deal.
One major hangup obsessed one of our investigators - the front and sides of the building were immaculately landscaped and maintained, but a large empty lot behind the employee parking lot in the rear of the building was a very scruffy wasteland with large patches of bare, hard-packed earth, very ugly in comparison with the remainder of the property.
He commented about it to our partner-in-charge and said, "Gee! that ugly lot is an eyesore and detracts from the value of the property as a going business. One of our recommendations should be that they clean up and landscape that lot as part of the deal."
The partner opined that, "Maybe there are some plans to develop that lot." and proceeded to dig further.
The upshot after some digging
(literally - we hired a contractor to do some test bores when we couldn't get a straight answer from executives of the manufacturer):
we discovered the entire site was polluted with toxic waste which the manufacturer had tried to hide with new landscaping. The waste in the rear was so toxic, the landscaping efforts were unsuccessful and the plants all died within the six months we were performing the due diligence! The idiots in the manufacturing company were trying to browbeat their landscape contractor into replanting for free instead of spending another $20,000 or $30,000 for a cosmetic cleanup BEFORE our due diligence got to that stage. They were so full of hubris, they thought we'd miss the problem.
We collected our fee and were out of the deal. Our client cited the report as excuse for killing the deal and THEY were out of it as well. We later learned the manufacturer had been illegally dumping waste for years to save the cost of proper disposal. The litigation with governments, investors, workers, neighboring property owners went on for years. Miraculously, none of the guys responsible were ever indicted.
Off hand, I'd say our finding constituted prima facie evidence the SYSTEM was ineffective, since all internal controls which should have detected and stopped the pollution were bypassed. Dozens of people had to have either advance knowledge or "after the fact" knowledge of the dumping, but no mention was ever made in internal audits. Certainly, no corrective action was recorded as being suggested or implemented.