9,10 and 13 | Accounting homework help

Chapter 9

10. When searching public records, what are the four different types of information sources

available to investigators?

The four types of information sources are government, private, online databases, and internet searches.

11. What is the Gramm-Leach-Bliley Act? How does it apply to investigators?

The act requires financial institutions to explain their information-sharing practices to their customers

and to safeguard sensitive data. This allows financial institutions to share information with investigators


Short Case 8

1. Without calculating the amount of unknown income, indicate possible red flags or trends you notice

in the numbers above.

Financial statement red flags provide a general overview of the warning signs a company should

look out for. It does not a imply an absolute occurrence of financial statement fraud, but simply

signals that a detailed investigation must be done of the accounts in the financial statement. Some

of the red flags shown in this example are increase in assets while there is a decrease in liabilities.

Beginning with assets, you can see that there is a sharp increase in automobiles, starting in year 2

and year 3 for $45,000 as compared to year 1, which was $18,000. In addition, we can also see an

increase in CD’s for $15,000 in years 2 and 3, while year 1 showed $5,000. The stock portfolio also

showed a large increase in years 2 and 3 for $15,000 as compared to year 1 for $3,500. The

individual also added another asset by purchasing a boat costing $15,000 in year 2 and 3.

Similarly, there is a decrease in mortgage liability from $200k in year 1 to $180k in year 2 and $100k

in year 3. Furthermore, the auto loan showed an increase from $12,000 in year 1 to $30,000 in year

This study source was downloaded by 100000779431045 from CourseHero.com on 07-30-2023 19:29:29 GMT -05:00


2, but then the liability did not exist in year 3. Finally, there was another loan, shown as “other loan”

which was taken out in year 2 for $18,000, then paid off by year 3.

2. Now calculate the amount of total income and unknown income using the numbers given. Does it

appear that a possible fraud exists? Could there be other explanations for the unknown income?

Using the comparative net worth asset method indicates the following results:

Comparative Net – Worth Asset Method

Year End 1 Year End 2 Year End 3


Residence $280,000 $280,000 $280,000

Automobile 18,000 45,000 45,000

CD 5,000 15,000 15,000

Cash 8,000 8,000 2,000

Stock Portfolio 3,500 15,000 15,000

Boat 15,000 15,000

Total Assets $314,500 $378,000 $372,000


Mortgage 200,000 180,000 100,000

Auto Loan 12,000 30,000

Other Loan 18,000

Total Liabilities $212,000 $228,000 $100,000

Net Worth $102,500 $150,000 $272,000

Change in Net Worth $47,500 $122,000

Add: Living expenses 47,000 47,000

Total Income $94,500 $169,000

This study source was downloaded by 100000779431045 from CourseHero.com on 07-30-2023 19:29:29 GMT -05:00


Less: Known Income 90,800 130,800

Income from Unknown Sources $3,700 $38,200

There can be an explanation for income from unknown sources because this money may have been

inherited, received as a gift, or through gambling rather than fraud.

Chapter 10

Short Case 7

1. Describe the steps you would take to investigate the suspected embezzlement.

As an investigator, I would first try to investigate the large fluctuations in the financial statement

accounts. Next, I would verify whether the credits and debits done by Jane are correct or not. The

person speaking against Jane may also be providing misleading information. Therefore, to prove

whether each claim made by the anonymous person is true, a detailed investigation must be done

prior to meeting with Jane. Without thorough research and sufficient evidence, it would be

pointless to interview her. In addition, Jane may have climbed the ladder of success rather quickly

because of her hard work and excellent skill set, which in turn may have upset the anonymous

person to make false claims about her. Jane’s lifestyle may appear more lavish than her salary can

reach but that does not necessarily mean that she is involved in fraudulent activity. It would be wise

to interview Jane’s co-workers and close friends to obtain information about her and her activities.

2. As a first step in your investigation, would you interview Jane about the problem? Why or why


As a first step in my investigation, I would not directly interview her about the problem, however,

I would interview her in a detailed manner starting with an introduction, followed by informative

questions, an assessment, and finally, a closing. At first, it would be best to ask Jane general

This study source was downloaded by 100000779431045 from CourseHero.com on 07-30-2023 19:29:29 GMT -05:00


questions. Then, I would begin to ask her more specific and informative type questions to see if

she provides accurate and consistent information. If Jane’s answers turn out to be misleading or

she is trying to lie throughout the interview process, then assessment and admission seeking

type of questions must be asked. It is imperative that the interview with Jane maintains a

respectful and professional tone. The questions made to Jane should not demoralize or

discourage her. The questions must not be biased. It is important that the investigator maintains

control throughout the entire period. Furthermore, careful observation, expertise in detecting

patterns and the ability to compare different responses are important attributes in detecting


3. How would you conduct Jane’s admission-seeking interview in order to be most effective?

If I found sufficient evidence, then I would seek an interview with Jane but without reasonable

cause I would reframe from doing so. I would design direct and indirect questions, which could

support my evidence of fraud such as, the cause of self-balancing of accounts or changes in

behavior and lifestyle.

Chapter 13

10. In what ways could financial statement fraud result from a merger?

When two firms merge, there are specific accounting rules that dictate at what amounts acquired

assets should be recorded. Sometimes, merged companies manipulate these rules to overstate the

assets of the combined company and thus commit financial statement fraud. Another type of

merger-related fraud is to overstate merger reserves and then reverse those charges into income or

to hide operating expenses in the merger reserve.

12. What are the four kinds of analysis that can be used in searching for analytical fraud symptoms?

Method 1: Focusing on changes in recorded balances from period to period. Method 2: Focusing on

changes in relationships from period to period (one of the best ways to detect understatement of

This study source was downloaded by 100000779431045 from CourseHero.com on 07-30-2023 19:29:29 GMT -05:00


liability frauds). Method 3: Comparing financial statement information with other companies.

Method 4: Comparing financial statement amounts with assets they are supposed to represent or

with nonfinancial statement factors.

Short Case 10

1. What were the main types of financial statement fraud committed at Cutter and Buck? Do these

types of fraud occur often?

The main type of financial statement fraud committed at Cutter and Buck was revenue

recognition. Cutter and Buck improperly recognized revenue of $5.7 million in shipments to

distributors functioning as company warehouses and later concealed the improper transactions

from the auditors, board of directors, and shareholders. Improper revenue recognition is the

most common type of financial statement fraud.

2. What should have been the appropriate accounting treatments?

The shipments were made on a consignment basis since distributors had no obligation to pay for

the goods. Thus, shipments should not have been recorded as sales until the distributors had

resold the merchandise.

3. The three parts of the fraud triangle are pressure, opportunity, and rationalization. List some of

the pressures that may have led to this fraud.

Some of the pressures that may have led to this fraud are declining sales, tough competition,

slow economy, shareholders who demand a higher stock return, and threat to management of

being fired or demoted.

This study source was downloaded by 100000779431045 from CourseHero.com on 07-30-2023 19:29:29 GMT -05:00

Powered by TCPDF (www.tcpdf.org)

Qualified Writings
Get 20% Discount on this Paper
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.