You are a forensic accountant and have been engaged to investigate a case of suspected fraud in
Question:
You are a forensic accountant and have been engaged to investigate a case of suspected fraud in a company. You have been provided with the following financial information for the past three years:
Year | Total Revenue | Total Expenses |
---|---|---|
2020 | $1,000,000 | $800,000 |
2021 | $1,200,000 | $900,000 |
2022 | $1,500,000 | $1,200,000 |
Your investigation has uncovered evidence that the company's expenses in 2020 and 2021 were overstated by 10% and 20%, respectively. Additionally, the company's revenue in 2022 was found to be inflated by 25%.
a) Calculate the company's net income for each of the three years before any adjustments were made. (6 marks)
b) Calculate the revised net income for each of the three years after the adjustments have been made. (8 marks)
c) Based on your analysis, what is your conclusion regarding the suspected fraud? (6 marks)
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws