Question:Wild Adventure conducts tours of wildlife reserves around the world. Thecompany recently purchased a lodge in Adelaide, Australia, securing a 4%mortgage from First Bank. In addition to monthly payments, Wild Adventuremust provide annual reports to the bank showing that the company has acurrent ratio of 1.2 or better.After reviewing the annual reports, the CEO, N.O. Scrooge, approached CarlHaupteisch, the CFO, and stated, "We've decided we are going to move allour long-term and held-to-maturity investments into our brokerage accountso we can sell them soon. Carl, go ahead and make the adjusting entries asof the current year-end."Carl made the adjustments. The subsequent year, the economy turned, andthe company's travel revenues dropped more than 60%. Wild Adventureeventually defaulted on the First Bank loan.1. What eect did the adjustments have on the nancial statements? Whateect did the adjustments have on the current ratio?2. What type of information in the nancial reports would have helped thebank detect this reclassication?3. Has a fraud occurred? If so, what is the fraud?