A former chairman, CFO, and controller of Donnkenny, Inc., an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as “sold,” and required sales orders to be backdated so that the sale could be moved to an earlier period. The combined effect of these actions caused $25 million out of $40 million in quarterly sales to be phony.a. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?b. How could this type of fraud be stopped?

Question
Asked Dec 15, 2019
1 views

A former chairman, CFO, and controller of Donnkenny, Inc., an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as “sold,” and required sales orders to be backdated so that the sale could be moved to an earlier period. The combined effect of these actions caused $25 million out of $40 million in quarterly sales to be phony.
a. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?
b. How could this type of fraud be stopped?

check_circle

Expert Answer

Step 1

Step 2

a.  

 

...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Cost Management

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Chapter 17-Financial Statement Analysis Any “off-balance-sheet" arrangements such as leases not incl...

A: Ratio AnalysisRatio analysis is a quantitative method of gaining insight into a company’s liquidity,...

question_answer

Q: Question 11 --/1 View Policies Current Attempt in Progress A company developed the following per-uni...

A: Given:Standard rate = $8 per gallonActual Quantity = 1000 gallonsActual Price = $7,600 for 1000 gall...

question_answer

Q: The Wheatland Company purchased merchandise on account from a supplier for $30,000, terms 1/10, n/30...

A: a.Calculate the  requirement of cash to pay the merchandise purchased on account during the discount...

question_answer

Q: An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is...

A: Calculation of Net pay for the month of January is as follows:

question_answer

Q: The inventory at the end of the year was understatedby $14,750. (a) Did the error cause an overstate...

A: (a) 

question_answer

Q: An employee of JHT Holdings, Inc., a trucking company, was responsible for resolving roadway acciden...

A: State the reason for which it takes so long to discover such a fraud:This is an illustration of a fr...

question_answer

Q: --/1 Question 19 View Policies Current Attempt in Progress rt The standard direct labor cost for pro...

A: Given:Standard rate = $20 per hourActual Hours = 62,000hoursStandard Hours = 5 hours for 1 unitActua...

question_answer

Q: --/1 Question 5 View Policies Current Attempt in Progress If the materials price variance is $3900 F...

A: Direct material variances: The difference between the actual material cost per unit and the standard...

question_answer

Q: Based on the following data, determine the cost of merchandise sold for November: $ 14,500 Increase ...

A: Cost of Goods SoldCost of goods sold indicates the costs involved for the inventory sold by the busi...