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Report on Financial Statement Fraud Scheme
Finance & Accounting
Pages 4 (1004 words)
REPORT ON FINANCIAL STATEMENT FRAUD SCHEME CASE STUDY: THAT WAY LIES MADNESS MEMO Date: March 02, 2013 To: The Management of Crazy Eddie Inc. From: Serious Fraud Investigating Officer Subject: Financial statement fraud investigations and findings report Summary of Investigation The financial statements of Crazy Eddie revealed that the company is making money by practicing fraudulent activities.
The inventories were shared between the various stores of the company to boost sales. Various external vendors were arranged to ship merchandises of the company claiming fake discounts. Loads of merchandises were sold to wholesalers and then the receipts were spread to individual stores of the company. These illegal money was entered and circulated between the Antar family and was parked into undisclosed foreign bank accounts. The initial reports suggest that when Crazy Eddie went public about twenty years ago, its shares were traded at $8. The company’s shares have inflated 10 times during the years due to manipulation of accounts. By showing fake sales, misrepresented inventories, doctoring and window dressing financial statements, the company was able to hide its true picture of financial position from the public. Thus, the company’s stocks looked more attractive from outside than it actually was. The sales of the company never fell since the merchandises circulated between the various stores and was treated as revenues. Such fraudulent practices helped Crazy Eddie to maintain a healthy double-digit growth and consequently inflated the company’s share prices. ...
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