The following information is given for Darwin Duck Down, Inc.

Year 1 Year 2

Sales $1,100,000 $2,000,000

Cost of Goods Sold $600,000 $1,250.000

Average Inventory 350,000 525,000

1. Calculate the gross profit margin for years 1 and 2.

1. Calculate the inventory turnover ratio for years 1 and 2.

1. What is the measured by the inventory turnover ratio and what are the fraud implication?

1. Calculate the average number of days inventory in stock for both years.

1. From these ratios, what if any are your fraud concerns?Be specific.

Financial Statement Fraud

Exercise Two

From your reading of the article regarding Betty Vinson and WorldCom, Inc., answer the following questions in the space provided

1. What was the accounting principle that Betty violated in the second and successive quarters of the financial statement fraud?Describe the fraudulent journal entry.

1. What pressures did Betty face in dealing with this situation?

1. What was the turning point in Betty's actions that clearly made her a co-conspirator?

1. What is the warning to each of us as employees from this cautionary tale of fraud.

Financial Statement Fraud

Exercise Three

From your reading of the Enron article in Canvas Module 6, answer the following questions in the space provided.

1. What type of Financial Statement Fraud did you find at Enron?

1. How many of the top executives at Enron were involved with the fraud?

1. What conditions at Enron encouraged this fraud?

1. How is the fraud at Enron different that the fraud at WorldCom?