How to answer those questions in the file that I attached?

Page 1 1. Use the Net Worth Method to identify potential income from unknown sources in this situation for BOTH 2003 and 2004: You receive an anonymous tip that your controller is embezzling assets from your company. You begin your investigation by interviewing several employees in the accounting department, who report no unusual behavior or sudden changes in the suspect's standard of living. One interviewee does report that the controller has gone on a number of extravagant vacations. You perform a net worth analysis, based on a search of public records, and find the following information: 2002 2003 2004 100,000 20,000 30,000 25,000 100,000 40,000 30,000 30,000 31,000 100,000 90,000 30,000 30,000 60,000 Liabilities Mortgage balance Auto loan 90,000 10,000 40,000 5,000 Income Salary Other 37,000 4,000 45,000 4,000 51,000 4,000 Expenses Mortgage payments Auto loan payments Other living expenses 6,000 2,000 15,000 6,000 2,500 15,000 6,000 2,500 20,000 Assets Personal residence Automobiles Stocks and bonds Boat Certificates of deposit Page 2 2. What are the 5 general guidelines for conducting interviews? Explain the logic behind each one and PROVIDE EXAMPLES to enhance your answer. Page 3 3. What are meant by the terms: financial statement transparency, management bias and measurement bias? Describe and provide examples of each term. Page 4 4. Consider the following case. Vulnerability Chart. Use the information to prepare a Fraud \"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 company's 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 bank's 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.\" Page 5 Question 4, continued. Page 6 5. a. Identify and describe Earnings Management Shenanigans 1 through 7. b. Relate as many of them as possible to the fraud facts presented in the following case. c. How would you utilize the Bull's Eye Approach with respect to this case? \"Fraud investigators found that 70% of the nearly $160 million in sales booked by an Asian subsidiary of a European company between September 1999 and June 2000 were fictitious. In an effort to earn rich bonuses tied to sales targets, the Asian subsidiary's managers used sophisticated schemes to fool auditors, including funneling bank loans through third parties to make it look as though customers had paid, when in fact they hadn't. In a lawsuit filed by the company's auditors, it was alleged that former executives 'deliberately' provided 'false or incomplete information' to the auditors and conspired to obstruct the firm's audits. To fool the auditors, the subsidiary used two schemes. The first involved factoring unpaid receivables to banks to obtain cash up front. Side letters that were concealed from the auditors gave the banks the right to take the money back if they couldn't collect from the company's customers. Hence, the factoring agreements amounted to little more than loans. The second, more creative, scheme was used after the auditors questioned why the company wasn't collecting more of its overdue bills from customers. The subsidiary told many customers to transfer their contracts to third parties. The third parties then took out bank loans, for which the company provided collateral, and the 'paid' the overdue bills to the company using the borrowed money. The company was, in effect, paying itself. When the contracts were later canceled, the company paid 'penalties' to the customers and the third parties to compensate them 'for the inconvenience of dealing with the auditors.' The investigators also found that the bulk of the company's sales came from contacts signed at the end of quarters, so managers could meet ambitious quarterly sales targets and receive multimillion-dollar bonuses. For example, 90% of the revenue recorded by the subsidiary in the second quarter of 2000 was booked in several deals signed in the final nine days of the quarter. But the company was forced to subsequently cancel 70% of those contracts because the customersmost of them tiny start-upsdidn't have the means to pay.\" Page 7 Question 5, continued. Page 8