ANSWER ONLY CASE 5

436 Part S Management Fraud CASE 4 AND 5 FIVE-YEAR FINANCIAL DATA FOR COMPANY A YEAR 5 YEAR 3 $110,250.00 82,687.50 27,562.50 YEAR 4 $137,812.50 66,150.00 71,662.50 YEAR 2 YEAR I $100,000.00 75,000.00 25,000.00 $206,718.75 $105,00000 Sales COGS Margin 59,535.00 78,750.00 147,183.75 26,250.00 The second, more creative, scheme was used after Perform a horizontal analysis of this balance sheet and identify any accounts that may be questionable. Take into account technology industry trends when performing the analysis. auditors questioned more of its overdue bills from customers. It turns that the subsidiary told many customers to transfer t contracts to third parties. The third parties then took bank loans, for which the company provided collat and then "paid" the overdue bills to the company u why the company wasn't collect For Cases 4 and 5, use the following information: Case 4 Perform horizontal analysis of the data in the previous table to indicate any potential red flags regarding pos- the borrowed money. The result was that the com was paying itself. When the contracts were later celed, the company paid "penalties" to the custo and the third parties to compensate them "for the i venience of dealing with the auditors." sible overstatement of sales. Case 5 Perform vertical analysis of the data in the previous table to indicate any potential red flags regarding possible understatement of the COGS. The investigators also found that the bulk company's sales came from contra end of quarters, so managers could meet amb cts signed Case 6 Fraud investigators found that 70 percent of the nearly $160 million in sales booked by an Asian subsidiary of quarterly sales targets and receive multimillion- bonuses. For example, 90 percent of the re recorded by the subsidiary in the second qua 2007 was booked in several deals signed in th nine days of the quarter. But the company was