Three brothers worked for a very large manufacturing company. One of the brothers worked as a warehouse foreman, another as a bookkepper, and another as a costumer service representative. The warehouse foreman would leave work everyday pushing a wheelbarrow full of old rags, with his lunch box balanced on top. The company guards became suspicious of this unusual behavior and began checking through the rags and the lunch box every day as the man left work. They never found anything hidden in the rags or in the lunch box. Every day, the man would take the wheelbarrow and sell it in the neighboring city to one of three different hardware stores. The brother in book-kepping would write up a sales ticket for the sale of one wheelbarrow to a fictitious construction company. The paperwork would be completed as if every sale were made on credit. As payment were received from a real company that had done business with the company for many years, he would record part of each payment on the fictitious company's account and adjust all of the accounting records to cover the irregularities. The brother working in costumer service would write up a complaint report each month explaining how the wheelbarrows sold to the fictitious company were falling apart on the construction sites. The report said the company demanded a refund for each of the faulty products. The brother in costumer service would send the report to the brother in bookkeeping, who then would send a "refund" check to the brother in the warehouse for the total cost of the wheelbarrows. The three brothers split all of the proceeds- until they went to jail. Explain how audit might lead to discovery and solution of this scheme
Three brothers worked for a very large manufacturing company. One of the brothers worked as a warehouse foreman, another as a bookkepper, and another as a costumer service representative. The warehouse foreman would leave work everyday pushing a wheelbarrow full of old rags, with his lunch box balanced on top. The company guards became suspicious of this unusual behavior and began checking through the rags and the lunch box every day as the man left work. They never found anything hidden in the rags or in the lunch box. Every day, the man would take the wheelbarrow and sell it in the neighboring city to one of three different hardware stores. The brother in book-kepping would write up a sales ticket for the sale of one wheelbarrow to a fictitious construction company. The paperwork would be completed as if every sale were made on credit. As payment were received from a real company that had done business with the company for many years, he would record part of each payment on the fictitious company's account and adjust all of the accounting records to cover the irregularities. The brother working in costumer service would write up a complaint report each month explaining how the wheelbarrows sold to the fictitious company were falling apart on the construction sites. The report said the company demanded a refund for each of the faulty products. The brother in costumer service would send the report to the brother in bookkeeping, who then would send a "refund" check to the brother in the warehouse for the total cost of the wheelbarrows. The three brothers split all of the proceeds- until they went to jail. Explain how audit might lead to discovery and solution of this scheme
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Three brothers worked for a very large manufacturing company. One of the brothers worked as a
warehouse foreman, another as a bookkepper, and another as a costumer service representative. The
warehouse foreman would leave work everyday pushing a wheelbarrow full of old rags, with his lunch box
balanced on top. The company guards became suspicious of this unusual behavior and began checking
through the rags and the lunch box every day as the man left work. They never found anything hidden in
the rags or in the lunch box. Every day, the man would take the wheelbarrow and sell it in the neighboring
city to one of three different hardware stores. The brother in book-kepping would write up a sales ticket
for the sale of one wheelbarrow to a fictitious construction company. The paperwork would be completed
as if every sale were made on credit. As payment were received from a real company that had done
business with the company for many years, he would record part of each payment on the fictitious
company's account and adjust all of the accounting records to cover the irregularities. The brother
working in costumer service would write up a complaint report each month explaining how the
wheelbarrows sold to the fictitious company were falling apart on the construction sites. The report said
the company demanded a refund for each of the faulty products. The brother in costumer service would
send the report to the brother in bookkeeping, who then would send a "refund" check to the brother in
the warehouse for the total cost of the wheelbarrows. The three brothers split all of the proceeds- until
they went to jail.
Explain how audit might lead to discovery and solution of this scheme
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