Fraud Examination
6th Edition
ISBN: 9781337619677
Author: Albrecht, W. Steve, Chad O., Conan C., Zimbelman, Mark F.
Publisher: Cengage,
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Question
Chapter 1, Problem 8SC
To determine
To determine the amount of additional revenue required to compensate for the fraud loss incurred.
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Match each situation with the fraud triangle factor-opportunity, financial pressure, or rationalization-that best describes it.
a.
An employee's monthly credit card payments are nearly 75% of his or her monthly earnings.
Financial Pressure
Rationalization
An employee earns minimum wage at a firm that has reported record earnings for each of the
last five years.
b.
Opportunity
C.
An employee has an expensive gambling habit.
An employee has check-writing and signing responsibilities for a small company, as well as
d.
reconciling the bank account.
If a tech industry company has their total stockholder's equity go up by $793,000 and their Software development costs and licenses(net of current portion) go up by $85,000 within 1 year and they have had a previous fraud in their company, what audit procedures should be performed?
6-73. MiniScribe
FRAUD As reported in the Wall Street Journal (September 11, 1989), MiniScribe, Inc., inflated its reported profits and inventory through a number of schemes designed to fool the auditors. At that time, MiniScribe was one of the major producers of disk drives for personal computers. The newspaper article reported that MiniScribe used the following techniques to meet its profit objectives:
An extra shipment of $9 million of disks was sent to a customer near year-end and booked as a sale. The customer had not ordered the goods and ultimately returned them, but the sale was not reversed in the year recorded.
Shipments were made from a factory in Singapore, usually by air freight. Toward the end of the year, some of the goods were shipped by cargo ships. The purchase orders were changed to show that the customer took title when the goods were loaded on the ship. However, title did not pass to the customer until the goods were received in the U.S.
Returned goods were…
Chapter 1 Solutions
Fraud Examination
Ch. 1 - Prob. 1DQCh. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Prob. 5DQCh. 1 - Prob. 6DQCh. 1 - Prob. 7DQCh. 1 - Prob. 8DQCh. 1 - Prob. 9DQCh. 1 - Prob. 10DQ
Ch. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - Prob. 13DQCh. 1 - Prob. 14DQCh. 1 - Prob. 15DQCh. 1 - Prob. 1TFCh. 1 - Prob. 2TFCh. 1 - Prob. 3TFCh. 1 - 4. Manufacturing companies with a profit margin of...Ch. 1 - Prob. 5TFCh. 1 - Prob. 6TFCh. 1 - 7. When perpetrators are criminally convicted of...Ch. 1 - Prob. 8TFCh. 1 - 9. A Ponzi scheme is considered to be a type of...Ch. 1 - Prob. 10TFCh. 1 - Prob. 11TFCh. 1 - Prob. 12TFCh. 1 - Prob. 14TFCh. 1 - Prob. 15TFCh. 1 - Prob. 16TFCh. 1 - Prob. 17TFCh. 1 - Prob. 18TFCh. 1 - Prob. 19TFCh. 1 - Prob. 20TFCh. 1 - Prob. 21TFCh. 1 - 22. In vendor fraud, customers don’t pay for goods...Ch. 1 - Prob. 23TFCh. 1 - Prob. 24TFCh. 1 - Prob. 25TFCh. 1 - Prob. 26TFCh. 1 - Prob. 27TFCh. 1 - Prob. 28TFCh. 1 - Prob. 29TFCh. 1 - Prob. 30TFCh. 1 - Prob. 1MCQCh. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Prob. 4MCQCh. 1 - Prob. 5MCQCh. 1 - Prob. 6MCQCh. 1 - Prob. 7MCQCh. 1 - Prob. 8MCQCh. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQCh. 1 - Prob. 11MCQCh. 1 - Prob. 13MCQCh. 1 - Prob. 14MCQCh. 1 - Prob. 15MCQCh. 1 - Prob. 16MCQCh. 1 - Prob. 17MCQCh. 1 - Prob. 18MCQCh. 1 - Prob. 19MCQCh. 1 - Prob. 20MCQCh. 1 - Which of the following is not an example of...Ch. 1 - Prob. 22MCQCh. 1 - Prob. 23MCQCh. 1 - Prob. 24MCQCh. 1 - Prob. 25MCQCh. 1 - Prob. 1SCCh. 1 - Prob. 2SCCh. 1 - Prob. 3SCCh. 1 - Prob. 4SCCh. 1 - Prob. 5SCCh. 1 - Prob. 6SCCh. 1 - Prob. 7SCCh. 1 - Prob. 8SCCh. 1 - Prob. 9SCCh. 1 - Prob. 10SCCh. 1 - Prob. 11SCCh. 1 - Prob. 13SCCh. 1 - Prob. 14SCCh. 1 - Prob. 15SCCh. 1 - Prob. 16SCCh. 1 - Prob. 1.1CSCh. 1 - Prob. 1.2CSCh. 1 - Prob. 1.3CSCh. 1 - Prob. 2.1CSCh. 1 - Prob. 2.2CSCh. 1 - Prob. 3.1CSCh. 1 - Prob. 3.2CSCh. 1 - Prob. 4.1CSCh. 1 - Prob. 4.2CS
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- Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?arrow_forwardIn a huge fraud scandal, CEO and CFO stole $150 million and inflated the company income by$500 million. A general ledger clerk was also implicated in the scheme. It was reported that they siphoned money through unapproved loans and fraudulent stock sales. Money was smuggled out of company disguised as executive bonuses or benefits. The reason cited by the perpetrators was that they needed money to pay off some gambling debts.In addition, they also stated that they worked long and hard hours at the company without being properly compensated or recognized. Upon investigating, the auditors found that the fraud had taken place on two levels. The auditors documented in their report that all the three factors of fraud were present. In addition, the auditors found that the company’s control systems deviated from the COSO framework. You are required to: a. IDENTIFY and EXPLAIN the TWO (2) levels of fraud that the auditors found. b. Making reference to the case, IDENTIFY and EXPLAIN…arrow_forwardWhich of the following is NOT a method UCI's former executive VP and CFO used to embezzle 2.97 million? options: 1) Charging personal purchases on UCI's corporate credit card, followed by arranging for UCI to pay the credit card statement by check 2) Preparing false expense reports and submitting them for reimbursement, resulting in payment to himself since nobody other than the accounts payable supervisor reviewed these reports 3) Adding family members to UCI's payroll and placing large checks into their bank accounts 4) Submitting unsupported check requests for personal credit card accounts and nonbusiness expenditures, such as construction work on his personal residencearrow_forward
- While spotting red flags is difficult, vertical and horizontal financial statement analysis introduces a straightforward approach to fraud detection. Evaluate Company A’s Five Year Financial Data, please see the attached. (a) Perform horizontal analysis of the above data to indicate any potential red flags regarding possible overstatement of sales. (b) Perform vertical analysis of the above data to indicate any potential red flags regarding possible overstatement of the COGS.arrow_forward1. A local bank reported that it lost $150,000 as the result of employee fraud. Ray Fairburn is not clear on what is meant by "employee fraud." Explain the meaning of fraud to Ray and give an example of fraud that might occur at a bank.arrow_forwardMay 13th, 1998, a Friday that will be remembered by a major Chicago bank. Embezzlers nearly escaped with $69 million! Arnand Moore, who was released after serving for years of his 11 years sentence for a $180,000 fraud, decided it was time to put his fingers and is something a little bigger and better. He instigated a $68.7 million fraud plan. Naming himself as “Chairman,” he assembled Herschel Bailey, Otis Wilson, Neal Jackson, Leonard Strickland, and Ronald Carson to complete the formation of his “board.” Most importantly, the “board” was able to convince an employee of the Chicago bank to provide their “in.” the caper required one month of planning in a small hotel in Chicago and took all of 64 minutes to complete. The bank employee had worked for the Chicago bank for eight years, and he was employed in the bank's wire transfer section, which dispatches multimillion dollar sums around the world via computers and phone lines. Some of the bank's largest customers send funds from…arrow_forward
- In the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…arrow_forwardIdentify fraud triangle concepts. BE7.1 (LO 1), C Match each situation with the fraud triangle factor-opportunity, financial pressure, or rationalization-that best describes it a. An employee's monthly credit card payments are nearly 75% of his or her monthly earnings. b. An employee earns minimum wage at a firm that has reported record earnings for each of the last five years. c. An employee has an expensive gambling habit. d. An employee has check-writing and check-signing responsibilities for a small company, as well as reconciling the bank account. Identify internal control objectives.arrow_forwardAccounting In a description of a fraud scheme at Sharefore Inc., an analyst writes: “The next quarter, analyst expectations are higher, but sales have not picked up. The firm provides additional incentives to its sales force, uses overtime to boost shipments but now has additional expenses to contend with (incentives and overtime), so it does not fully accrue all its consulting expenses. Third quarter rolls around and sales still haven't improved enough, but the analysts keep increasing targets. Because this time, operating tactics are not sufficient, management pressures the CFO to meet analyst forecast numbers. The CFO becomes aggressive in the interpretation of installment sales and expense accruals. As expectations keep rising, so does the firm's stock price.” What form or forms of financial statement fraud is this? Where would we expect to see the impact of this form of fraud in Sharefore Inc.’s financial statements?arrow_forward
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