Fraud Examination
6th Edition
ISBN: 9781337619677
Author: Albrecht, W. Steve, Chad O., Conan C., Zimbelman, Mark F.
Publisher: Cengage,
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Read the facts of the case in Problem 2-26 to become familiar withthe fraud involving Koss Corporation. From the company’s October 7,2009, proxy statement (Def 14A filing with the SEC), we know the followingfacts about the company’s audit committee and its members:Thomas L. Doerr 65, has been a director of the company since 1987. In1972, Mr. Doerr co-founded Leeson Electric Corporation and served asits president and CEO until 1982. The company manufactures industrialelectric motors. In 1983, Mr. Doerr incorporated Doerr Corporation asa holding company for the purpose of acquiring established companiesinvolved in distributing products to industrial and commercial markets.Currently, Mr. Doerr serves as president of Doerr Corporation.Mr. Doerr owns no stock in Koss Corporation and received $24,000 incash compensation during 2009 to serve on the audit committee.Lawrence S. Mattson 77, has been a director of the company since 1978.Mr. Mattson is the retired president of Oster company, a…
In the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…
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F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any.
You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales.
Further examination of the company's records reveals the following balances at November 15,2021:
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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
- Upon hearing that you are enrolled in a fraud class, a manager of a local business asks, “I don’t understand what is happening with all these major scandals such as the Bernie Madoff scandal, the Goldman Sachs accusations, and the Enron fraud. There are billions of dollars being stolen and manipulated. How can any good auditornot notice when billions of dollars are missing?” How would you respond?arrow_forwardRohini works as an accountant with PQR Ltd. She embezzled $20,000 from the company bank account. She was caught in the annual audit of the company. She justified her action saying that her employer has not given any pay rise, so she had to take $20,000 from the account. Explain in your own words the internal control that may have failed in the above situation. Also explain which element of the fraud triangle Rohini is referring to justify her action.arrow_forward
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