Chapter Nine Homework
Page 284, Case Number 49
As a certified fraud examiner, Laura Wu has been retained by anattorney to investigate an overstatement of revenue fraud atUnlimited Growth Ltd. All sales to the company are on credit (i.e.,there are no cash sales). Laura has found an entry in the recordsdebiting accounts receivable and crediting the Sales account on thelast day of the fiscal year.
a. Would confirmations help her gather evidence in preparing forprosecution of financial statement fraud? Why?
b. Laura employed a novice fraud examiner to help her in theinvestigation. After an employee of Unlimited Growth had preparedthe confirmation letters (using the positive “in-blank” type), hernovice fraud examiner reviewed the letters and asked anotheremployee (who had worked at Unlimited Growth for 12 years and had acharacter that was beyond reproach) to mail them for him. Theconfirmations were all returned, and all recipients had indicatedthat the information provided in the letter agreed with theirrecords. Should Laura be concerned about the process her fraudexaminer used and the results?
