Case 1:

Clever, Inc. is a car manufacturer. Its 2020 income statement is as follows:

Clever, Inc. Income Statement for the

Year Ended December 31, 2020

Sales Revenue	$20,000
Cost of goods sold	10,000
Gross margin	$10,000
Expenses (variable)	8,000
Net Income	$2,000

Alexander, Inc.is a car rental agency based in Florida. Its 2020 income statement is as follows:

Alexander, Inc. Income Statement for the

Year Ended December 31, 2020

Service Revenue	$20,000
Expenses (variable)	15,000
Net Income	$5,000

During 2020, both Clever, Inc. and Alexander, Inc. incurred a $1,000 fraud loss.

Required:

1. How much additional revenue must each company generate to recover the losses from the fraud?

2. Why do these amounts differ?

3. Which company will probably have to generate less revenue to recover the losses?

Case 2:

You are having lunch with another graduate student. During the course of your conversation, you tell your friend about your new fraud examination class. After you explain the devastating impact of fraud on businesses today, she asks you the following questions:

1. What is the difference between fraud and error?

2. With all the advances in technology, why is fraud a growing problem?