I need help answering questions 1-4. please provide support for your answers.

Luckin carried out similar schemes using Luckin personnel or employees of the two related entities and ando shell companies-purported intermediary agents that would resell coupons to fictitious individual customers. Luckin maintained a database to track its business operations, including coupons sales and redemptions and customer orders: To carry out these sehemes, certain employees created a second database that included both legitimate coupon sales, redemptions, and customer orders as well as fabricated coupon sales, redemptions, and customer orders. Essentially, the company was kecping two sets of books, one real and the other fabricated. The employees then switched the source data for certain reports-reports used by Luckin's Finance Department for bookkeeping and financial reporting purposes. The Finance Department had access only to the fabricated database so could not distingsish the legitimate from the fabricated transactions. As a result, the Finance Department incorporated the fabricated transactions into Luckin's publicly disclosed financial statements. An Aprit 2019 email from an employee of one of the related entities to certain Luckin officers confirmed that \"the original reports/forms in the system are all unsecable,\" and that those reports included the cost carryower and income roports. In total. Luckin fabricated transactions and revenues totaling approximately \\( \\$ 311 \\) million from April 2019 through at least January 2020. While fabricating coupon sales, Luckin returned funds to the funding sources both directly through bank transfers and indirectly through fabricated expense payments to vendors. For example, Luckin made payments to 13 purported suppliets of raw materials that did not provide any materials to the company, overpaid two providers of human resources (outsourcing) services, and paid delivery fees to three companies that did not provide any services to Luckin. Nevertheless. Luckin reported these payments as business-related expenses in its publicly disclosed financial statements. In total. Luckin fabricated costs and expenses tovaling approximately \\( \\$ 196 \\) million in 2019 , which inflated its costs and expenses by more than 20 percent. Luckin's fabricated costs and expenses allowed for funds to be returned, in part, to the funding sources, which were controlled by or associated with Luckin employees and employees of related companies. The employees increased costs to make those costs consistent with its increased, inflated revenue. In March and April 2020, Luckin continued returning money to the funding sources through direct bank Luckin Cottee The speedy rise and then fall of China-based company Luckin Coffee Inc, shows what can happen when a company is driven by fradujent behavior that goes unchecked. It also demonstrates why strong corporate governanee systems are essential to ensure that material misstatements of the financial statements are detected and reported. Overview Luckin is a retail coffee provider incorporated in the Cayman Islands with its principal place of business in the Siming District. Xiamen. Fujian, China. The company was touted as the next Starbucks. The company's shares were traded on the U.S. stock exchange, NASDAQ. through its trading of American Depositary Shares (\"ADS\"). ADS refer to shares in forcign companies that are held by U.S. depository banks and can be traded in the United States, including on major exchanges. ADS are meant to facilitate trading of the shares. Listing on a major exchange in the United States generally requires the same level of reporting as that done by domestic companies, as well as adherence to GAAP. ADSs allow foreign companies access to a wider investor base and the world's most sophisticated financial marketplace. The main drawback of ADS for investors is that there is some currency risk, even though they are denominated in U.S, dollars. Luckin made an initial public offering of ADS in the United States on May 17,2019, raising approximately \\( \\$ 600 \\) million. In the prospectus. Luckin disclosed that the company's total revenues were \\( \\$ 125 \\) million for the yearend 2018 and \\( \\$ 71.3 \\) million for the quarter ending March 31, 2019. Luckin acknowledged that it had incurred significant operating losses since its inception and that it may continue to be unprofitable if it could not sustain its historical growth rate. Luckin made statements in its IPO that hyped the financial results including \"strong growth since inception.\" Various news reports characterized its results as \"staggering\" and \"super-charged\" oceurring at a \"break-neck speed,\" According to news reports, several rounds of private fundraising had already rapidly escalated Luckin's pre-IPO valuation from \\( \\$ 1 \\) million in July 2018 to \\( \\$ 2.2 \\) biltion in Novembet 2018, to \\$2.9 billion in April 2019. Its May 2019 IPO priced at \\( \\$ 17 \\) per ADS valued the company at \\( \\$ 3.9 \\) billion. On its first day of trading. Luckin's shares rose as high as \\( \\$ 25 \\) per ADS. By midjune 2019, a number of analysts recognized that the company did not anticipate breakeven profitability in the near term but focused on Luckin's extraordinary revenue growth trajectory. The engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. Luckin reached an agreement to settle legal charges on February 4, 2021. It agreed to pay a 5180 million penalty to settle the accounting fraud charges. The company filed for bankruptey in the United States less than a year after it admitted that millions of dollars in sales had been fabricated. In its filing. Luckin said the move will help if financially restructure itself and strengthen its balance sheet. According to a press release, the bankruptcy won't \"materially impact\" Luckin's day-to-day operations and its roughly 3.600 cafes will remain open. The filing also reveals that Luckin's former chief operating officer Jian Lu and several of his direet reports \"had engaged in certain misconduct, including fabricating certain transactions\" beginning in 2019 amounting to about \\$310 million. Lu and CEO Jenny Zhiya Qian were both fired in May 2020. Months later its stock was delisted. Ernst \\& Young Ernst \\& Young Hua Ming LLP, the auditor for Luckin Coffec, said it had no responsibility for the company's 2019 financial statements and what it called the company's fraudulent misconduct. EY said it did not issue an audit report on the Luekin's 2019 earnings statement and so was not liable for the company's financial fraud. EY claimed to bear no liability based on an on-site investigation by China's finance ministry, the audit firm said in an official statement posted on WeChat. EY stressed that Luckin's fraudulent practices began in April 2019, and it spotted an anomaly in Luckin's 2019 financial statement late in January 2020. EY promptly brought in its anti-fraud team, which later found that some managers had inflated earnings between the second and fourth quarters of 2019 with bogus transactions. The determination led to Luckin's disclosure of the fraud That discovery eventually prompted Luckin to issue a public announcement about the fraud. Luckin filed a notice with the U.S. SEC on April 2, 2020, admitting that it had falsified roughly \\( \\$ 300 \\) million worth of transactions between the second and fourth quarters of 2019 The company said that the incident started from \"certain issues\" identified during the audit of the consolidated financial statements for the year ended December 31, 2019. This makes it seem as though EY may have prompted Luckin's admission. Questions 1. What was the motivation of Luckin in developing fraudulent transactions and fraudulent accounting? Was it indicative of earnings management? Explain. 2. Discuss the red flags that something was amiss at Luckin. 3. What role did corporate governance play in the fraud? 4. Use ethical feasoning to analyze what the motivation or Luckin might have been in carrying out the fradulent transactions. progress of the schemes as indicated in two omails in October 2019 to Luckin officers writing that \"the same-store revenue can maintain a gronth rate of more than 35 percent, but its credibility will be questioned. \" and \"suppliers will notice the abnormality lin Luckin's growthl because we don't purchase that much.\" In advance of Luckin's first earnings release as a public company, analysts expected quarterly revenues of approximately \\( \\$ 133 \\) million. By contrast. Luekin's revenue for the entire fiscal year of 2018 was \\( \\$ 125 \\) million. SEC Action On August 14,2019, Luckin furnished to the SEC a Form 6-K disclosing its earnings for the second quarter ending June 30, 2019. In its 6K, Luckin reported that its net revenues for the second quarter were \\( \\$ 132 \\) million. Total net revenues from products sold were reportedly approximately \\( \\$ 126 \\) million, an increase of 698 percent over the same quarter in 2018. Luckin highlighted this astronomical growth on a sameday carnings call. Luckin's reported total net revenues for the second quarter of 2019 were overstated by more than 27 pereent. Despite Luckin's substantial revenue growth, analyst reports generally characterized the results as \"in line\" with expectations. Luckin's stock declined moderately, closing at \\$20.68 per ADS the following day, The company's expenses were also overstated in this period because of fraudulent expense transactions created to return funds and create the appearance that expenses were consistent with reported revenue. Luckin's reported total operating expenses of approximately \\( \\$ 233 \\) million were overstated by approximately \\( \\$ 22 \\) million, or approximately 9 pereent. Because Luckin materially misstated its total revenues and expenses in the second quarter of 2019 , it also materially understated its net loss in this period. The company reported a loss of approximately \\( \\$ 99 \\) million, which was understated by approximately \\( \\$ 14 \\) million, of approximately 15 percent. Fabricated revenue and expense transactions continued through the fourth quarter of 2019 but are not discussed here in the interest of brevity. The SEC charged Luckin with defrauding investors by misstating its revenue, expenses, and net operating loss to appear to be more profitable and growing faster than it actually was, and to meet the company's earnings estimates. Specifically, the SEC had charged that Luckin violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 \"by using any means of instrumentality of interstate commerce, or of the mails, or any facility of any national securities exchange, in connection with the purchase or sale of any security: (a) to employ any device, scheme, or artifice; (b) to make any untrue statement of a material fact or to omit to state a material fict onfy problem was that it used fraudulent revenue recognition techniques to achieve such a growth rate. On April 2, 2020, Luckin acknowledped its fabricated sales, as well as fabricated transactions that substantially inflated Luckin's eosts and expenses. Luckin warned investors that they should no longer rely upon its 2019 quarterly reports or its fourth-quarter earnings guidance. When Luckin's fraud was revealed the price of its ADS plummeted by more than 75 percent, from a closing price of \\$26.20 per ADS on April 1, 2020, to \\$6.40 per ADS on April 2, 2020. On July 13, 2020, the NASDAQ delisted Luckin's ADS from the cxchange. Luckin's fraudulent practices, including but not limited to its fabricated sales transactions and its false statements regarding revenue. income, and expenses, deceived investors about the true financial performance of the company, in particular, its rapid growth, and violated the anti-fraud and other provisions of the U.S. federal securities laws. The amounts discussed below are approximations because they have been converted from the Chinese currency called Renminbi to U.S. dollars. Fabricated Transactions Chief among Luckin's fraudulent revenue was fabricated coupon sales transactions for the purpose-of artificially inflating its revenue and growth. These transactions were carried out by certain Luckin employees, including sentor officers and directors who directed and carried out three separate fraudulent schemes to fabricate coupon sales and associated revenue. Luckin and certain of its employees knew or were reckless in not knowing that by fabricating oupon sales and associated revenues and income, the company was providing investors with materially false and misleading information about the company's financial results. This practice operated as a fraud on or deceit of Luckin investors. As an example of the fraudulent transactions, Luckin fabricated coupon sales and redemptions by purported individual customers. Beginning in April 2019. Luckin employees and others transferred money from individual bank accounts-controlled by Luckin employees and their family members, as well as employees of two entities associated with certain officers and directors of Luckin (t.e, related entities) -to WeChat and Alipay accounts associated with mobile phone numbers those individuals controlled. The transferred funds were then used to purchase coupons on Luckin's app. Luckin, through the actions ofits employees, then created fake customer orders to \"redeern\" the coupons, although real orders were never placed and the coupons were never actually redeemed. Luckin recognized the fabricated