Refer to the Focus on Fraud feature Inventory Valuation at MagnaChip Leads to Desired Increase in Gross
Question:
Refer to the Focus on Fraud feature “Inventory Valuation at MagnaChip Leads to Desired Increase in Gross Margins.” Obtain a copy of the SEC’s AAER for this case.
a. The Focus on Fraud feature describes one approach that MagnaChip used to manipulate gross margin. Identify another approach MagnaChip used to manipulate gross margin through inventory accounts.
b. Identify internal control deficiencies that may have allowed this fraud to occur.
c. When MagnaChip restated its financial statements in early 2015, what happened to its stock price? Has the stock price recovered?
d. What role did MagnaChip’s external auditors play in identifying the fraud? Were the auditors professionally skeptical?
Step by Step Answer:
a Paragraph 28 of the AAER notes Certain MagnaChip finance employees in Korea engaged in other practices to manipulate MagnaChips gross margins For example manufacturing employees in Korea with knowle...View the full answer
Auditing A Risk Based-Approach
ISBN: 978-1337619455
11th Edition
Authors: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
