1. Ms. Sue the accounting officer for Koss Corporation embezzled or stole $31 million over 5 years to fund her lavish lifestyle. This was a material amount in relation to Koss Corporation's reported income of $1,976,668 for 2009 . The fraud was not detected by the external auditors. Ms. Sue used links and wire transfers from the Koss company account to her personal American Express account, manual checks, and traveler's checks drawn on the company's account to pay for her luxury purchases. The embezzlement was concealed by overstating the assets (other inventory), expenses, and cost of sales and understating the liabilities, through the collusion of two employees (loyal to Ms. Sue) working in the accounting department. At the time when Ms. Sue was arrested, she had more than 22,000 items confiscated or taken from her home that had been purchased on Koss company account funds. Below are three examples of assets from the court filings against Ms. Sue for purchases made using the company's credit card. a. $670,000 from Georgia-Armani b. $1,355,322 from Zara Boutique, a woman's clothing store. c. $127,000 from Malabar Jewelers equired. (1 point for each total of 3 points) a. Is this fraud an example of asset misappropriation or fraudulent financial reporting? b. Ms. Sue came from a wealthy family, so the theft was not needed for her to live comfortably. What incentive and attitude/rationalization do you believe drove Ms. Sue to steal? c. Koss Company designs and makes and sells headphones and accessories. Do you think it is normal for a manufacturing company to buy these items for inventory? How could auditors have detected these cash disbursements or payments as fraudulent activities? 1. Ms. Sue the accounting officer for Koss Corporation embezzled or stole $31 million over 5 years to fund her lavish lifestyle. This was a material amount in relation to Koss Corporation's reported income of $1,976,668 for 2009 . The fraud was not detected by the external auditors. Ms. Sue used links and wire transfers from the Koss company account to her personal American Express account, manual checks, and traveler's checks drawn on the company's account to pay for her luxury purchases. The embezzlement was concealed by overstating the assets (other inventory), expenses, and cost of sales and understating the liabilities, through the collusion of two employees (loyal to Ms. Sue) working in the accounting department. At the time when Ms. Sue was arrested, she had more than 22,000 items confiscated or taken from her home that had been purchased on Koss company account funds. Below are three examples of assets from the court filings against Ms. Sue for purchases made using the company's credit card. a. $670,000 from Georgia-Armani b. $1,355,322 from Zara Boutique, a woman's clothing store. c. $127,000 from Malabar Jewelers equired. (1 point for each total of 3 points) a. Is this fraud an example of asset misappropriation or fraudulent financial reporting? b. Ms. Sue came from a wealthy family, so the theft was not needed for her to live comfortably. What incentive and attitude/rationalization do you believe drove Ms. Sue to steal? c. Koss Company designs and makes and sells headphones and accessories. Do you think it is normal for a manufacturing company to buy these items for inventory? How could auditors have detected these cash disbursements or payments as fraudulent activities
