Winton Marx a producer of motorcycle parts has experienced poor
Winton Marx, a producer of motorcycle parts, has experienced poor income, due to foreign competition. In a move to try to undercut a possible proxy fight with dissident stockholders, Geoff Daniels, the company’s CEO, formed a shell company known as Turbo Repair Shops, Inc. The company was supposedly a regional chain of motorcycle repair shops and fictitious documents were created showing fabricated Winton Marx sales. As a result Winton Marx sales were significantly increased over the preceding year, as compared to other industry competitors who showed declines and losses.

What audit procedures would have alerted the auditor to the risk in this situation and the identification of the fraud?

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