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Koss Case

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ISSN 1940-204X Koss Corporation Corporate Governance, Internal Controls, and Ethics: What Went Wrong? Melanie O. Anderson Slippery Rock University INTRODUCTION THE ACCOUNTING FUNCTION Koss Corporation is a Milwaukee company whose principal business is the design, manufacture, and sale of stereo headphones and related accessories. Michael Koss is the CEO; his father, John Koss, founded the company in 1958. The company has trademarks and patents for its products to differentiate itself from the competition. Koss Corp. has a six-man Board of Directors, including Michael and his father. John is 81 years old and serves as chairman of the Board. Michael is 57 years old and serves as vice chairman, president, CEO, COO, and …show more content…

Sue served on several charity boards, organized lavish parties for their events that cost millions of dollars, and purchased all items that did not sell at the charity auctions she organized.6 Sue also had a reputation as a demanding boss: Her assistants were required to help her with the charity events, and Sue took them out to lunch almost daily. Julie and Tracy also went to Sue’s house to help her unpack and store the many expensive items she purchased. Sue loved designer clothing, shoes, and accessories and purchased over 20,000 items in a five-year period from 2004 to 2009. She purchased so many items that they did not fit in her house. So, she rented a storage unit and a two-office suite to store her unused purchases. In addition, Sue made some purchases that she never picked up from the retailers.7 Table 1: Financial Data from 2008 and 2009 June 30, 2009 Net Sales Net Income June 30, 2008 $ 38,184,150 $ 46,943,293 1,976,668 4,494,289 Basic Earnings per Common Share: Basic: 0.54 1.22 Diluted: 0.54 1.22 $ 28,470,352 $ 29,977,077 Total Assets Cash Dividends per Common Share $ 0.52 $ 1.52 IM A ED U C ATIO NA L C A S E JOURNAL 1 VOL. 6, N O. 1, ART. 3, MARCH 2013 PAYMENTS BY CHECK OR WIRE TRANSFER Sue could not pay for all of these purchases with her $200,000 salary or her physician husband’s $600,000 salary.8

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