FRAUD EXAMINATION ALBRECHT ALBRECHT Revenue and Inventory Frauds

FRAUD EXAMINATION ALBRECHT & ALBRECHT Revenue and Inventory Frauds Management Fraud Chapter 11

What are the most common ways to commit revenue fraud? Management Fraud

Why are revenue frauds so common? 1. 2. How is it done? Management Fraud

Complete the Chart Typical Revenue – Related Transaction Management Fraud

What kind of changes should you look for? Management Fraud

What kind of changes should you look for? Management Fraud

What is the formula for measuring period to period changes? Management Fraud

What is an alternative to prior formula? Management Fraud

Match Ratio to Name Gross Profit Margin Sales Return % Sales Discount % A/R Turnover # Days in A/R Management Fraud Sales Returns Total Sales Gross Profit Net Sales A/R Turnover Net Sales Discounts Gross Sales

Match Ratio to Explanation Allowance for Doubtful Accounts Bad Debt Expense Common Size Financial Statements Earnings per Share Management Fraud A measure of profitability Estimated uncollectible A/R, a contra-asset, Financial statements converted to % Expense for revenues or receivable presumed uncollectible

Does ratio analysis or vertical analysis or horizontal analysis tell if fraud has been committed? Management Fraud

What are some other investigative procedures you could perform? Management Fraud

Comment on Behavior & Lifestyle Flags Management Fraud

Discuss TIPS Management Fraud

Explain How Inventory & Cost of Goods Sold Are Manipulated to Commit Fraud Management Fraud

Review Effect of Overstating Inventory on a Simplified Income Statement Management Fraud

Review Effect of Overstating Inventory & Understating purchases on Cost of Goods Sold Management Fraud

Complete Inventory Cycle Management Fraud

Identify Some Inventory Fraud Symptoms Management Fraud

Complete Chart Analysis of Period-to-Period Changes Inventory Account Balances With Industry Competitors Inventory Relationships With Real-World Numbers Management Fraud

Match Ratio to Name Allowance for Doubtful Accounts Bad Debt Expense Cost of Goods Sold Common-Size Financial Statements Management Fraud Financial statements converted to % The expense of goods sold to customers A contra receivable, estimated uncollectible A/R Expensing estimated uncollectible A/R or revenues

Match Ratio to Name Earnings Per Share Revenue Recognition Sales Returns Management Fraud Sales returned by customer for refund Determining when revenues are earned & can be reported on the income statement A measure of profitability