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Could you please answer the following: Sunny Sounds Pty Ltd borrowed $50M from YB Bank. This loan is subject to an agreement that Sunny Sounds
Could you please answer the following:
Sunny Sounds Pty Ltd borrowed $50M from YB Bank. This loan is subject to an agreement that Sunny Sounds maintains its debt to equity ratio at 30%. Over the past two years Sunny Sounds has earned losses and expects to breach this agreement if a loss is earned in the current period. To make matters worse, Sunny Sounds has been unable to raise additional equity. No dividends were paid in the past and no dividend is expected to be declared in the current period. Note: The debt to equity ratio can be expressed as: Total Liabilities Total Owners Equity REQUIRED: i. Explain what Sunny Sounds Pty Ltd might do fraudulently to maintain its debt to equity ratio so that it does not breach the loan agreement with YB Bank. ii. Discuss how fraud prevention strategies can be aligned to the Fraud Triangle and Fraud Scale to fight fraud and at the same time eliminate detection and investigation costs. Sunny Sounds Pty Ltd borrowed $50M from YB Bank. This loan is subject to an agreement that Sunny Sounds maintains its debt to equity ratio at 30%. Over the past two years Sunny Sounds has earned losses and expects to breach this agreement if a loss is earned in the current period. To make matters worse, Sunny Sounds has been unable to raise additional equity. No dividends were paid in the past and no dividend is expected to be declared in the current period. Note: The debt to equity ratio can be expressed as: Total Liabilities Total Owners Equity REQUIRED: i. Explain what Sunny Sounds Pty Ltd might do fraudulently to maintain its debt to equity ratio so that it does not breach the loan agreement with YB Bank. ii. Discuss how fraud prevention strategies can be aligned to the Fraud Triangle and Fraud Scale to fight fraud and at the same time eliminate detection and investigation costsStep by Step Solution
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