Chapter 8, Problem 8.1FC

1.

To determine

Fraud Case

D worked as an accounting clerk with a gas distributor and his brother M lost his job at the machine plant. To help his brother in winter he made an entry to debit the parts inventory and credit M’s account, as he knew the manager or the owners’ son were incompetent and could not detect the extra entry made. D went on repeating the process until it was detected by an auditor. While firing D, the owner said had he approached him for M’ situation, he could have worked out something.

To evolve: The methods to prevent this kind of employee fraud.

2.

To determine

To find out: The effect of the fraud by D on the balance sheet and the income statement.

3.

To determine

To ascertain: The extent of the discretion a business hasin regard to accommodating in hardship situation.