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Corporate Financial Accounting 14th Edition by Carl Warren,James Reeve,Jonathan Duchac
Edition 14ISBN: 978-1305653535Corporate Financial Accounting 14th Edition by Carl Warren,James Reeve,Jonathan Duchac
Edition 14ISBN: 978-1305653535 Exercise 25
Financial statement fraud
A former chairman, CFO, and controller of Donnkenny, Inc. , an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as "sold," and required sales orders to be backdated so that the sale could be moved to an earlier period. The combined effect of these actions caused $25 million out of $40 million in quarterly sales to be phony.
a. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?
b. How could this type of fraud be stopped?
A former chairman, CFO, and controller of Donnkenny, Inc. , an apparel company that makes sportswear for Pierre Cardin and Victoria Jones, pleaded guilty to financial statement fraud. These managers used false journal entries to record fictitious sales, hid inventory in public warehouses so that it could be recorded as "sold," and required sales orders to be backdated so that the sale could be moved to an earlier period. The combined effect of these actions caused $25 million out of $40 million in quarterly sales to be phony.
a. Why might control procedures listed in this chapter be insufficient in stopping this type of fraud?
b. How could this type of fraud be stopped?
Explanation
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Verified
a. The human element of control is a lim...
Corporate Financial Accounting 14th Edition by Carl Warren,James Reeve,Jonathan Duchac
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