Question

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.

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



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  • CreatedJanuary 21, 2015
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