You work as an accountant for Sportsworld. Sportsworld is an Australian company that runs several stores for
Question:
You work as an accountant for Sportsworld. Sportsworld is an Australian company that runs several stores for sports equipment. The first Sportsworld store opened in 1995, but over the last years the increase of online retailers has lead to an increase in competition. Despite these challenging conditions, Sportsworld has outperformed its competitors with a continuous growths rate over the last years. Mila Daniels has recently been appointed as new CEO. Mila has noticed a number of suspicious issues and has asked you to investigate.
Issues include the following:
•At the beginning of each reporting period the number of returns increases substantially.
•Warranties have not been recognised in the financial reporting.
•A recent stocktake indicated that stock levels are far below inventory numbers.
•Access controls in the warehouses are weak and every employee can enter warehouses to restock stores.
1.Describe potential fraud schemes that could explain the suspicious issues raised by Sportsworld.
2.What steps would you undertake to investigate the potential fraud?
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby