We suspect that there are 3 types of fraud scheme going on:

Fictitious revenue

Concealed Cost of goods sold

Improper Assets Valuation

Below are the transactions identified for the respective fraud scheme:

Fictitious Revenue

These involve sales of goods that did not occur. Fictitious sales most often involve fake customers but can also involve legitimate customer. In the company data, these transactions involved existing customers 71 and customer 72. The journal entries for J2949, J2950, J2951 and J2952 are fictitious sales transactions which are all recorded in last days of the financial year and without the corresponding records of cost of goods sold. And those fabricated sales are reversed back by the cancelling and bad debt journal entries in the beginning of first month of the next financial year. The fake sales of J2949 and J2950 are reversed back by the sales cancellation records in J2961 and J2962. And the sales of J2951 and J2952 are considered as bed debt within a month, 10 days to be exact with improper journal entries from CEO Anthony Caputo is a red flag sign of fraudulent transaction. Total fictitious revenue amount of J2949, J2950, J2951 and J2952 is $528,231.68

Concealed Cost of Goods Sold

Fluctuation in the cost of goods sold has a direct impact in company income statement by inflating the gross profit. Reduction of the cost of goods sold towards the end of period can be suspected as fraudulent transaction. In the sales transaction entries for J2953 and J2954, the cost of lumber is missing with the amount of $6530.1 and $4897.575. The missing amounts are adjusted in the Accounts Receivables in the same journal entries to match the debit and credit amount. In transactions J2965 and J2966, the cost of hardware of transactions J2953 and J2954 are reversed back by adjusting entry from CEO Anthony Caputo. Total concealed cost of goods sold in J2953, J2954, J2965 and J2966 is $265,389.215

In addition, the false sales transaction of J2949, J2950, J2951 and J2952 are recorded without the cost of goods sold. Which makes the revenue goes higher without relative costs.

Improper Asset Valuation

In this scheme, assets are overstated to present an unrealistic view of the company's financial position. It can involve improperly valuing inventory, investments, fixed assets or receivables. In the company data set, it shows that improper fixed assets revaluation. On 5/5/2006, the company created asset account, Machinery and Equipment improperly in transactions J2943, J2945 and J2947 debiting Amortization Expense account with the amount of 1$ each. And then those assets are all revaluated in 5/25/2006 by the journal entries J2955, J2957 and J2959 and increased the 'Other income' account. When the asset value increased and company gain from the revaluation, it should not be reported on income statement; instead an equity account should be credited and called 'Revaluation Surplus'. There are some missing transaction of J2944, J2946, J2948, J2956 and J2958, which have chance of related to improper asset revaluation fraud scheme. Total improper asset valuation amount in J2943, J2945, J2947, J2955, J2957 and J2959 is $275,003. Total amount that improperly recorded as income in J2955, J2957 and J2959 is $275,000

Question: Based on these transactions, suggesting audit procedures needed to confirm or dispel the suspicion of those transactions in the respective fraud schemes