Assignment 1: You keep looking over the Green Company's financial statements to see where your analysis is going wrong. You are certain that the company is not experiencing revenue growth that would support the consistent increase in the inventories that are being reflected on the balance sheet. You just finished a comprehensive audit of all the physical controls of inventory, so you doubt that inventory is being stolen. Everything else in the financials seems to look fine. In fact, they seem to indicate that the company is improving in profitability.
Using both the required text and external resources, address each of the questions below. Your responses should range between 2-4 strong paragraphs for each question, with references appropriately cited. Visuals (tables, charts, graphs) are encouraged as a tool in summarizing major points.
- What might be a valid reason for the increase in Green Company's inventory cost?
- Assuming that fraud is being committed, how could a fraud perpetrator commit this type of fraud?
- What could be done to prevent this type of fraud?
Assignment 2: Provide a unique and supported response to each of the questions below. You are encouraged to utilize other sources besides the textbook. In your submission, please write out the question and provide the response directly afterwards.
- Explain why the overstatement of a reserve for accumulated depreciation of an acquired company at the time of acquisition would cause an overstatement of goodwill.
- Discuss what types of fraudulent activities could create increases in gross margin as a percentage of sales.
- How can lifestyle changes help in detecting fraud?
- Briefly describe how the use of databases could help in detecting kickback fraud schemes.
- After reading lecture two, choose one of the three employee schemes discussed and suggest three ways it may be mitigated or prevented.
- Describe the type of person that is most likely to commit a large fraud.