Fraud Case Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected. To Discuss: How the fraudulent accounting treatment affect the current ratio.

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Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

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