Case Study And Answering Questions: Fraud Symptoms (Case Study Sample)

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A Case Study: Case 7
1 According to the case study, below is a list of the revenue-related fraud symptoms as well as schemes used.
The use of revenue-related fraud symptoms and schemes result in overstating a firm’s revenues as well as its net income. These schemes are many and can involve various transactions to accomplish certain tasks therefore, it is crucial to know the repercussions of these schemes. According to the case study, the following are revenue-related fraud symptoms and schemes used:
* The act of funneling/channeling loans from banking institutions via third parties with the aim of making it seem like the customers have already paid the loan when they have not.
* Deliberately providing incomplete information or even false information to auditors and conspiring to block the auditing process taking place within the firm.
* The act of factoring the unpaid receivables to the banks with the aim of obtaining up-front cash. The bank was given the permission to take the money back if they could not make to collect from the customers belonging to the company. In addition, the side letter concealed from the auditors gave these banks the permission.
* The other fraud act was about the bulkiness of the company’s sales which was as a result of managers waiting till the end of the quarter’s days in order to sign the contracts, the contracts that would boost the company’s quarterly sales hence meeting the managers’ sales targets. This meant that the higher the company’s sales during a certain quarter, the higher the bonus for the executives.
2 This is a discussion on how actively searching as well as understanding revenue-related fraud symptoms could have led the company’s auditors in discovering the fraud acts.
To begin with, the best way to actively search for these fraud acts is to search careful for the analytical symptoms that focuses on the financial statements, to search for the accounting or documentary symptoms for example journal entries, to search for the control environment weaknesses, to search for any complaints or tips made and to search for any behavioral or verbal and lifestyle symptoms. If any of these symptoms are detected, then it is crucial to make sure that these symptoms are immediately followed up. Understanding the value of follow-ups and approaches to use as far as the fraud symptoms are concerned is important because follow-ups ensure that symptoms are investigated to help determine and prove whether they are fraud related or coincidences or if a fraud has been c...