1. Please explain the tangible and intangible losses resulting from the cyberattack in the forensic accounting case.

2. Why does Michael believe the shutdown will affect Soap Shop’s rate of return by the following estimates: (1) 40 percent chance of a 10-percent decrease; or a 60 percent chance of a 25-percent decrease. Please explain how he estimated the rate of return and how reliable the projection is.

Forensic Accounting Case:

"Soap Shop, an e-tailer, had its vendor website shut down for three days due to a denial of service attack. The company’s vendor website is an auction-based system where vendors compete to supply specific products at the lowest price. As Soap Shop uses a JIT system, it could not fill orders on its retail website which remained open for customers’ orders during the two days. Michael, the controller, estimates the dollar value of the unfillable customer’s orders over the two-day period is $700,000. He believes that forty percent of those orders can be filled. 

The restoration and analysis labor costs of repairing the system are $220,000. The normal rate of return on sales for Soap Shop is 20 percent due largely to the internet auction systems used with vendors. The shutdown of the vendor site required the emergency purchase of soap and lotion products from higher-priced vendors and increased shipping costs that together totaled $200,000. Michael believes the shutdown will affect Soap Shop’s rate of return. He provides the following estimates: (1) 40 percent chance of a 10-percent decrease; or a 60 percent chance of a 25-percent decrease."

Answer rating: 100% (QA)

Answer to the Above question Lost sales 700000 060 ... View the full answer