A Brief Note On Apollo Shoes, Inc. Potential For Fraud Memo
Apollo Shoes, Inc.
Potential for Fraud Memo
September 24, 2014
There are a few “red flags” that have come to my attention while reviewing the minutes provided to me from Apollo Shoes, Inc. For starters, in our first meeting we requested to meet with the predecessor, and was told by Mr. Unum who is the Vice President of finance, they would rather we not speak to them. When a company refuses to have the current auditor speak with the previous auditor this always throws up a red flag. Another red flag that has come to my attention is the way Mr. Lancaster seems to use the term “heads are going to roll” when referring to write offs, and additional sales. This could encourage others to falsify information to stay out of trouble. Sales are down; however, spending has increased. We will need to pay close attention to make sure they are not “doctoring” the books. …show more content…
Fraud is when a person knowingly falsifies information that another person will make decisions based on, and that person will be hurt by the outcome.
There are many types of fraud that can be committed within a company, for example; audit risk, management fraud risk, employee fraud, larceny, embezzlement, just to name a few. These collectively are known as white collar crimes, because the majority of the time nobody gets physically hurt. These forms of fraud are conducted behind a desk on paper or the computer.
Management fraud risk is where management of a company will deliberately misstate financial information at the risk of hurting investors and employees. Employee fraud is when an employee steals supplies for their personal use. Larceny is simple theft, and embezzlement is misappropriate of funds. The categories of white collar crime or fraud normally consist of transactions being mishandled. For instance, transaction either being reported incorrectly or not reported at all, transactions are reported in the incorrect period or incorrect
account.
Many of the fraud risks include words such as motivation, dominated, and aggressiveness. In the minutes of Apollo Shoes many of the words are either used or attitudes shine through displaying this act. In addition, another fraud risk factor would be that the industry is declining, and this has been noted in the minutes a couple of times for Apollo Shoes. This puts Apollo Shoes on the high end of audit risk.
There are many ways fraud might be perpetrated within an organization. They might apply a payment received to an incorrect account, period, or they might not apply it to the system at all. If cash is received, the accounts receivable clerk might pocket that money without anyone’s knowledge. Businesses might state they have more inventory than they do, or that they had additional accounts payable that they might not have had. There are many ways a business can try to cover up fraud.
As auditors we need to try and stay one step ahead of those that want to commit fraud. Before partaking in an audit, we need to make sure we fully understand their business. This will be helpful if there is something on the books that should not be. In addition, meeting with staff members, and asking questions is always a good way to get information. The person or persons that are committing the fraud, has probably not let everyone in the company know. Therefore when you ask another person a question you might get the truth.
Potential for Fraud Memo
September 24, 2014
There are a few “red flags” that have come to my attention while reviewing the minutes provided to me from Apollo Shoes, Inc. For starters, in our first meeting we requested to meet with the predecessor, and was told by Mr. Unum who is the Vice President of finance, they would rather we not speak to them. When a company refuses to have the current auditor speak with the previous auditor this always throws up a red flag. Another red flag that has come to my attention is the way Mr. Lancaster seems to use the term “heads are going to roll” when referring to write offs, and additional sales. This could encourage others to falsify information to stay out of trouble. Sales are down; however, spending has increased. We will need to pay close attention to make sure they are not “doctoring” the books. …show more content…
Fraud is when a person knowingly falsifies information that another person will make decisions based on, and that person will be hurt by the outcome.
There are many types of fraud that can be committed within a company, for example; audit risk, management fraud risk, employee fraud, larceny, embezzlement, just to name a few. These collectively are known as white collar crimes, because the majority of the time nobody gets physically hurt. These forms of fraud are conducted behind a desk on paper or the computer.
Management fraud risk is where management of a company will deliberately misstate financial information at the risk of hurting investors and employees. Employee fraud is when an employee steals supplies for their personal use. Larceny is simple theft, and embezzlement is misappropriate of funds. The categories of white collar crime or fraud normally consist of transactions being mishandled. For instance, transaction either being reported incorrectly or not reported at all, transactions are reported in the incorrect period or incorrect
account.
Many of the fraud risks include words such as motivation, dominated, and aggressiveness. In the minutes of Apollo Shoes many of the words are either used or attitudes shine through displaying this act. In addition, another fraud risk factor would be that the industry is declining, and this has been noted in the minutes a couple of times for Apollo Shoes. This puts Apollo Shoes on the high end of audit risk.
There are many ways fraud might be perpetrated within an organization. They might apply a payment received to an incorrect account, period, or they might not apply it to the system at all. If cash is received, the accounts receivable clerk might pocket that money without anyone’s knowledge. Businesses might state they have more inventory than they do, or that they had additional accounts payable that they might not have had. There are many ways a business can try to cover up fraud.
As auditors we need to try and stay one step ahead of those that want to commit fraud. Before partaking in an audit, we need to make sure we fully understand their business. This will be helpful if there is something on the books that should not be. In addition, meeting with staff members, and asking questions is always a good way to get information. The person or persons that are committing the fraud, has probably not let everyone in the company know. Therefore when you ask another person a question you might get the truth.