Knottyville Case Essay

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Knottyville Country Club: Asset Misappropriation Srinivasan Ragothaman LEARNING OBJECTIVES After completing and discussing this case, you should be able to Evaluate misappropriation risk factors Evaluate internal controls Design new control Governance in non-profit sector Analyze materiality decisions Apply SAS 99, PCAOB AS5, and SAB 99 Perform cost benefit analysis Knottyville Country Club: An Instructional Case on Asset Misappropriation There was a stunned silence in the courtroom as the Circuit Judge was about to announce the sentence. “You are sentenced to 15 years in prison for grand theft. Your abominable conduct ran long and deep, and it is now time to pay for it,” said the judge. The judge also suspended an…show more content…
The seven member board of directors is elected every two years by the members. It includes four officers--the president, vice president, secretary and treasurer—and is responsible for the day-to-day management of the Club. The board has broad powers to borrow money and to enter into contracts necessary for the normal operation of the Club. The Club has five committees – membership committee, the finance committee, the nominating committee, the construction and maintenance committee and the special events committee. The finance committee has three members elected from the membership at large and the treasurer is an ex-officio member of the finance committee. The finance committee met just twice a year. The Club was taking in approximately $8 million each year in membership fees alone. In addition, the restaurant, the bar, banquets, rentals and a variety of other programs brought in an additional $18 million each year. The president of the club was a friendly, jovial fellow and treated everyone with great warmth. He had no accounting or finance background. He was very trusting of people, in general and considered all employees and members as belonging to one big happy family. Shenanigans of the general manager: Fancy Rockbottom was employed by the Club in a variety of capacities for twenty-two years including the bookkeeping function. The last six years she served as the general manager and continued to serve as the bookkeeper for the Club. Fancy was also in

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