Chapter Nine Homework Page 284, Case Number 49 As a certified fraud examiner, Laura Wu has been...

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General Management

Chapter Nine Homework
Page 284, Case Number 49
As a certified fraud examiner, Laura Wu has been retained by anattorney to investigate an overstatement of revenue fraud atUnlimited Growth Ltd. All sales to the company are on credit (i.e.,there are no cash sales). Laura has found an entry in the recordsdebiting accounts receivable and crediting the Sales account on thelast day of the fiscal year.
a. Would confirmations help her gather evidence in preparing forprosecution of financial statement fraud? Why?
b. Laura employed a novice fraud examiner to help her in theinvestigation. After an employee of Unlimited Growth had preparedthe confirmation letters (using the positive “in-blank” type), hernovice fraud examiner reviewed the letters and asked anotheremployee (who had worked at Unlimited Growth for 12 years and had acharacter that was beyond reproach) to mail them for him. Theconfirmations were all returned, and all recipients had indicatedthat the information provided in the letter agreed with theirrecords. Should Laura be concerned about the process her fraudexaminer used and the results?

Answer & Explanation Solved by verified expert

4.3 Ratings (828 Votes)

A Yes ofcourse confirmations will help Laura gather evidence in preparing for prosecution of financial statement fraud since as it is mentioned she has found an entry in the records debiting accounts receivable and crediting the Sales account on the last day of the fiscal year where all the sales are performed on credit B The following steps need to be folloewed while examining a fraud in an organisation STEP ONDE Begin the case If the case starts with a complaint or report fully debrief the complainant getting as much detail as possible If the case starts with the discovery of a red flag match the red flag to the potential scheme and then look for other red flags of the suspected schemes An automated proactive search for fraud indicators might be effective if the necessary data is available STEP TWO Evaluate the allegations or suspicions Determine whether the allegations or suspicions the red flags are specific and serious enough to justify an investigation which can be time consuming disruptive and costly If you determine that a complaint or report warrants further investigation try to See Answer

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