Question
Heres a case that gives us the chance to decide how to analyze the financial statements to see if fraud may be occurring. Jessica Smith
Heres a case that gives us the chance to decide how to analyze the financial statements to see if fraud may be occurring. Jessica Smith is an old friend of yours and contacted you with some questions about possible fraud in her car wash business. Jessica owns several car washes and believes that financial statement fraud for the individual car washes may be occurring. She pays each car wash manager a bonus if they earn a certain level of profits. She is worried that some managers are overstating profits to earn a higher bonus. She is coming over today to see whether you can help him determine whether her suspicions are valid. She is bringing along the financial statements for each car wash (income statements, balance sheets, and cash flow statements) for the last five years. What kind of financial statement analysis could you perform to help Jessica detect possible fraud and why would you use the procedures or the analysis you chose? Be very specific.
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