Consider the following case. Use the information to prepare a Fraud Vulnerability Chart.

Rural Electra is a new electronics company that produces circuit boards for personal computers and has located in a small southern town. The three founders, who previously worked for another electronics company, appointed themselves chairman/CEO, president/COO and controller/treasurer. They are also members of the board of directors in Rural Electra. Two of the three founders together owned approximately 10.7% of the companys common stock. The board of directors has seven members, and they meet about four times a year, for which they receive an annual retainer of $4,500 plus a fee of $800 for each meeting attended. Their new company is well received by the townspeople, who are excited about its prospects and what it may mean for the local company. The city showed its enthusiasm by providing Rural Electra with an empty building, and the local bank came up with an attractive credit arrangement. In turn, the company asked the banks president to serve on its board of directors. Two years later, the three founders began to commit financial statement fraud, which went on for about three years. The fraud involved overstating inventory, understating the cost of goods sold, overstating the gross margin, and overstating net income.