Fraud Case Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected. To Discuss: How the fraudulent accounting treatment affect the current ratio.

Question

Want to see the full answer?

Answer 1

Question

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Marilyn Terrill is the senior auditor for the audit of Uden Supply Company for the year ended December 31, 20X4. In planning the audit, Marilyn is attempting to develop expectations for planning analytical procedures based on the financial information for prior years and her knowledge of the business and the industry, including these: Based on economic conditions, she believes that the increase in sales for the current year should approximate the historical trend. Based on her knowledge of industry trends, she believes that the gross profit percentage for 20X4 should be about 2 percent less than the percentage for 20X3. Based on her knowledge of regulations, she is aware that the effective tax rate for the company for 20X4 has been reduced by 5 percent from that in 20X3. Based on a review of the general ledger, she determined that average depreciable assets have increased by 10 percent. Purchases of equipment occurred relatively evenly throughout the year. Based on her knowledge of…

In your audit of Aviary Industries for calendar year 2013, you founda number of matters that you believe represent possible adjustments to the company’sbooks. These matters are described below. Management’s attitude is that “once the booksare closed, they’re closed,” and management does not want to make any adjustments.Planning materiality for the audit was $100,000, determined by computing 5% ofexpected income before taxes. Actual income before taxes on the financial statementsprior to any adjustments is $1,652,867.Possible adjustments:1. Several credit memos that were processed and recorded after year-end relate tosales and accounts receivable for 2013. These total $26,451.2. Inventory cutoff tests indicate that $25,673 of inventory received on December 30, 2013,was recorded as purchases and accounts payable in 2014. These items were included inthe inventory count at year-end and therefore were included in ending inventory.3. Inventory cutoff tests indicate several sales invoices…

You are the audit manager at KPMG & Coopers a medium-sized audit firm undertaking the audit forthe year ended 30 June 2018 of Vesta Tech Ltd, an electronic component manufacturer located inSydney. During the planning stage of the audit you discovered that one of Vesta Tech Ltd’s majorsuppliers went bankrupt one month ago, causing major product shortages. To overcome the problem,Jonathon Marshall, the husband of the finance director, Nimat Marshall provided electroniccomponents to Vesta Tech Ltd through his private company. There is no formal agreement in placewith Jonathon Marshall, however, the goods are being provided at competitive prices. You areconcerned about the electronic components that Jonathon Marshall’s company is supplying, becausehis products are new to the market and you have heard some of Vesta Tech Ltd’s staff complainingthat they are of poor quality.The board has informed you that although sales have been strong this year, Vesta Tech Ltd hassuffered significant…

Answer 2

Question

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Answer 6

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

Answer 7

Chapter 4, Problem 4.1CTFC

1.

To determine

Fraud Case

Case Summary: A, the newly minted CPA was auditing the Company P. He observed that the current ratio has gone down drastically from 1.9 in 2016 to 0.3 in 2017. He detected that the sales returns for the substandard quality was being debited to an long-term asset called “grain reserves” in place of sales return and allowance to keep the income unaffected.

To Discuss: How the fraudulent accounting treatment affect the current ratio.

Answer 8

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Answer 9

2.

To determine

To Identify: Any reason for someone in the company to take such kind of action.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 4 - Assets are listed on the balance sheet in the...Ch. 4 - Which of the following accounts would be included...Ch. 4 - Which situation indicates a net loss within the...Ch. 4 - Which of the following accounts is not closed? a....Ch. 4 - What do closing entries accomplish? a. Zero out...Ch. 4 - Which of the following is not a closing entry?Ch. 4 - Which of the following accounts may appear on a...Ch. 4 - Which of the following steps of the accounting...Ch. 4 - Clean Water Softener Systems has Cash of 600,...Ch. 4 - Which of the following statements concerning...

Solution Summary: The author explains how the fraudulent accounting treatment affects the current ratio.

Concept explainers

To Identify: Any reason for someone in the company to take such kind of action.

Want to see the full answer?

Chapter 4 Solutions