1. FRAUD EXAMINATION ALBRECHT & ALBRECHT
Revenue and Inventory Frauds
Chapter 11
Management Fraud

2. What are the most common ways to commit revenue fraud?
Management Fraud

3. Why are revenue frauds so common?
How is it done?
Management Fraud

4. Typical Revenue – Related Transaction
Complete the Chart
Typical Revenue – Related Transaction
Management Fraud

5. What kind of changes should you look for?
Management Fraud

6. What kind of changes should you look for?
Management Fraud

7. What is the formula for measuring period to period changes?
Management Fraud

8. What is an alternative to prior formula?
Management Fraud

9. Match Ratio to Name Sales Returns Gross Profit Margin Total Sales
Net Sales
Sales Return %
Net Sales
A/R
Sales Discount %
A/R Turnover
Net Sales
A/R Turnover
Sales Discounts
Gross Sales
# Days in A/R
Management Fraud

10. Match Ratio to Explanation
Allowance for Doubtful Accounts
A measure of profitability
Estimated uncollectible A/R, a contra-asset,
Bad Debt Expense
Common Size Financial Statements
Financial statements converted to %
Expense for revenues or receivable presumed uncollectible
Earnings per Share
Management Fraud

11. Does ratio analysis or vertical analysis or horizontal analysis tell if fraud has been committed?
Management Fraud

12. What are some other investigative procedures you could perform?
Management Fraud

13. Comment on Behavior & Lifestyle Flags
Management Fraud

14. Discuss TIPS
Management Fraud

15. Explain How Inventory & Cost of Goods Sold Are Manipulated to Commit Fraud
Management Fraud

16. Review Effect of Overstating Inventory on a Simplified Income Statement
Management Fraud

17. Review Effect of Overstating Inventory & Understating purchases on Cost of Goods Sold
Management Fraud

18. Complete Inventory Cycle
Management Fraud

19. Identify Some Inventory Fraud Symptoms
Management Fraud

20. Period-to-Period Changes
Complete Chart
Analysis of
Period-to-Period Changes
Inventory Account Balances
With Industry Competitors
Inventory Relationships
With Real-World Numbers
Management Fraud

21. Match Ratio to Name Financial statements converted to %
Allowance for Doubtful Accounts
The expense of goods sold to customers
Bad Debt Expense
A contra receivable, estimated uncollectible A/R
Cost of Goods Sold
Common-Size Financial Statements
Expensing estimated uncollectible A/R or revenues
Management Fraud

22. Sales returned by customer for refund A measure of profitability
Match Ratio to Name
Earnings Per Share
Sales returned by customer for refund
Determining when revenues are earned & can be reported on the income statement
Revenue Recognition
Sales Returns
A measure of profitability
Management Fraud