Fraud Examination
6th Edition
ISBN: 9781337619677
Author: Albrecht, W. Steve, Chad O., Conan C., Zimbelman, Mark F.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 13, Problem 9SC
Case 9
ABCDE Technologies, Inc., designs, manufactures, and markets and extensive line of POC cards. The company sells its PC cards primarily to original equipment manufacturers (OEMs) for industrial and commercial applications in a market with intense competition. In fact, man OEM companies ran into financial difficulty in 2017 because of fierce competition. The following tables are part of the company’s financial statements for 2016 and 2017:
Determine the red flags that exist in these financial statements. Describe the scenarios that might contain these symptoms.
Based upon the red flags and scenarios you identified, determine what types of financial statement fraud the company may be involved in (Hint: Pay careful attention to cost of goods sold, sales, and allowance for doubtful accounts.)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Please Answer me with typing
Q1. Tata Unisys is an integrated IT sector company. Its products include mini and microprocessor-based systems, software sets, serial printers, and handlers. The following table contains data about the financial performance of the company for the year 2014-15 & 2015-16, you are required to use financial ratios as a tool and then analyze the company and give your comments to support your conclusions:
Horizon Corporation manufactures personal computers. The company began operations in 2013 and reportedprofits for the years 2013 through 2016. Due primarily to increased competition and price slashing in the industry,2017’s income statement reported a loss of $20 million. Just before the end of the 2018 fiscal year, a memo fromthe company’s chief financial officer to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors willrequire us to write them off. The resulting loss for 2018 will cause a violation of our debt covenants and forcethe company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. Iknow the company’s president and he will accept the merchandise and acknowledge the shipment as a purchase.We can record the sale in 2018 which will boost profits to an acceptable level. Then J.B. Sales will simply returnthe…
Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply…
Chapter 13 Solutions
Fraud Examination
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Horizon Corporation manufactues personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020's income statement reported a loss of $20 million. Just before the end of 2021 fiscal year, a memo from the company's chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments: "If we dont do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt convenants and force the company into bankruptcy. I suggest that you ship half of out inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's presdient, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply return…arrow_forward8. Presented below are the Statements of Financial Position of Vickie Merchandising, for the past two calendar years, ending 2013 and 2014. Vickie is on the process of analyzing its financial statements in order to ascertain changes in each of its account balances. Vickie would want to identify account balances whose changes are worth investigating. Cash Assets Marketable Securities Accounts Receivable Merchandise Inventory Prepaid Expenses Total Current Assets Property, Plant, and Equipment (net) Total Assets Vickie Merchandising Statements of Financial Position. December 31 Liabilities and Owner's Equity Accounts Payable Salaries Payable Utilities Payable Taxes Payable Total Current Liabilities Notes Payable (due 2016) Total Liabilities Owner, Capital Total Liabilities and Owner's Equity 2014 P 125,000 45,000 85,000 50,000 4,000 P 309,000 450,000 P 759,000 30,000 20,000 10,000 15,000 ℗ 75,000 300,000 → 375,000 384,000 ℗ 759,000 2013 P 112,000 40,000 77,000 45,000 2,000 ℗ 276,500…arrow_forwardCintas designs, manufactures, and implements corporate identity uniform programs that it rents or sells to customers throughout the United States and Canada. The company’s stock is traded on the NASDAQ and has provided investors with significant returns over the past few years. Selected information from the company’s balance sheet follows. For 2012, the company reported sales revenue of $3,707,900 and cost of goods sold of $1,517,415.arrow_forward
- Brodaddy LLC is a leading software solutions company in Oman, established in the year 2013. The company has branches in Dubai, Qatar and Malaysia. The company has received "the Malaysia best employer award" in the year 2020. Moreover, the company has reported 3% growth in their consolidated income during the first quarter of 2021. However, the internal auditing department of the company has raised concerns about the Business and financial risk of the companies. As a result, the board of directors has instructed Mr. Aslam Ahmed to analyse the operating, financial and combined leverages of the company to take necessary steps to minimize the overall risk. Data Extracted from the financial reports of the companies are given below Item Amount / Quantity Sales 150,000 OMR Unit Sold 1000 Nos Variable cost 70 OMR Fixed Cost 30,000 OMR Interest Expenses 10,000 OMRarrow_forwardGrifols, S. A., is a Spanish pharmaceutical company focusing on the development, manufacturing, and sale of therapeutic products. At the end of 2013, Grifols was rated "BB" by Standard & Poor's and considered to have a stable business risk profile. Requiredb. What type of factors does a credit rating agency consider in rating a company?arrow_forward. Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled information regarding its transactions with Square and Cloudburst for 2017, as well as its expectations regarding their interactions over the next 3 years: (in pic) Ortel’s transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Ortel is headquartered in the Cayman Islands and pays no income taxes. The owners of Ortel insist on a required rate of return of 12%. Q. Based on the net present value from cash flows over the next 3 years, is Cloudburst or Square a more valuable customer for Ortel?arrow_forward
- . Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled information regarding its transactions with Square and Cloudburst for 2017, as well as its expectations regarding their interactions over the next 3 years: (in pic) Ortel’s transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Ortel is headquartered in the Cayman Islands and pays no income taxes. The owners of Ortel insist on a required rate of return of 12%. Q. Cloudburst threatens to switch to another supplier unless Ortel gives a 10% price reduction on all sales starting in 2018. Calculate the 3-year NPV of Cloudburst after incorporating the 10% discount. Should Ortel continue to transact with Cloudburst? What other factors should it consider before making its final decision?arrow_forwardQT, Inc., and Elppa Computers, Inc., compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales $56,940 $120,357 Cost of merchandise sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490 a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year. QT Elppa 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventory…arrow_forward. Ortel Telecom sells telecommunication products and services to a variety of small businesses. Two of Ortel’s key clients are Square and Cloudburst, both fast-growing technology start-ups located in New York City. Ortel has compiled information regarding its transactions with Square and Cloudburst for 2017, as well as its expectations regarding their interactions over the next 3 years: (in pic) Ortel’s transactions with Square and Cloudburst are in cash. Assume that they occur at year-end. Ortel is headquartered in the Cayman Islands and pays no income taxes. The owners of Ortel insist on a required rate of return of 12%. Q. What is the expected net cash flow from Square and Cloudburst for the next 3 yearsarrow_forward
- QT, Inc., and Elppa Computers, Inc., compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions): QT Elppa Sales $56,940 $120,357 Cost of merchandise sold 44,754 92,385 Inventory, beginning of period 1,382 6,317 Inventory, end of period 1,404 7,490 a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year. QT Elppa 1. Inventory turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in inventory…arrow_forwardIsland Solutions is a technology business that retails and wholesales computer hardware along with awide variety of technology products and solution services. Recently, several competitors have enteredthe market and introduced new products that might drive some of the business’ inventory intoobsolescence. The company has always been IRFS compliant and wants to ensure that it follows theappropriate authoritative literature in determining the accounting for some significant market changes.The accountant at Island Solutions has tasked two small teams of interns from to conduct several pieces of research and dry-run practices. The following data is available for the month of September for two items of inventory that mightsoon be render obsolete for Island Solutions.Inventory balances at September 1, 2023, were as follows:USB-C (TA3) Hub – 200 @ $400 ea.USB-C (TB3) Hub – 600 @ $800 ea. USB-C (TA3) HUB Date Purchases Sales Sep 5 500 @450 Sep 10 500@540 Sep 15 400 @475…arrow_forward[The following information applies to the questions displayed below.] CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales $ 2,760,000 Net operating income $ 110,400 Average operating assets $ 920,000 The following questions are to be considered independently. Brewer 8e Rechecks 2019-01-10 3. The Chief Financial Officer of the company believes a more realistic scenario would be a $1,850,000 increase in sales, requiring a $232,500 increase in average operating assets, with a resulting $292,975 increase in net operating income. What would be the company’s ROI in this scenario? (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License