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A company?s CFO is criminally charged with fraud....




A company?s CFO is criminally charged with fraud. Tenjurors believe he is guilty beyond a reasonable doubt, and twojurors believe he is ?probably guilty? but are not convinced beyond a reasonable doubt. The jurors have tried to resolve their differences, are not making any additional progress. Which of the following statements is true? a. He will be found guilty because all twelve jurors believe, at a minimum, he probably committed fraud. b. If the jurors inform the judge that they cannot make any progress, the judge can replace the currentjury with alternates who were present for the entire case. c. Because this is a criminal case, the defendant must prove that he didn?t commit fraud. d. If the jurors inform the judge that they cannot make any progress, the judge can decide to end deliberations and the verdict will be decided by the majority of the jurors. e. None of the other responses are correct (i.e. all of the above statements are false). A company ships inventory to its distributor and on the condition that the company will accept any returns from the distributor if the distributor cannot sell the inventory to end customers. If the Company has recorded revenue upon shipment and did not record an allowance for estimated returns, what fraud scheme has management committed? a. Kiting b. Re -dating transactions c. Partial shipments d. None of the above e. Channel stuffing Refer to the facts in the previous question. If the company?s executives perpetrated the above fraud, what red flags would indicate that a fraud may have occurred? a. Total revenue, gross margin, and net income significantly increased compared to prior year. b. There is a significant increase in customer complaints related to sales by a particular vendor. c. Total liabilities significantly decreased compared to prior year. d. The ratio of warranty expense to total revenue significantly increased in the current year, and the accrual for warranty expenses (liability) at the end of the year is significantly higher than last year. e. Any of the above red flags would indicate that the executives are perpetrating a fraud to increase the likelihood they will receive the maximum bonus next year. While in the CFO?s office, you read an email in which the CFO instructs the accounts payable clerks not to enter any more invoices in the accounting system for the next four weeks (until the after the end of the quarter). What fraud scheme could be occurring? a. It is likely that no fraud scheme is occurring as the CFO is using a common cash management technique. b. The CFO is perpetrating a billing scheme. c. The CFO is attempting to understate the amount of current liabilities reported by the company. d. The CFO is planning a bankruptcy fraud. e. The CFO will perpetrate an inadequate disclosure fraud if she does not disclose this activity to the company?s auditors.


Paper#4948 | Written in 18-Jul-2015

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