CHAPTER 1Case 1: Fraudulent Financial Statements

1-1 LARSEN CONVENIENCE STORE: USING ANALYTICAL PROCEDURES IN DETECTING FINANCIAL STATEMENT FRAUD

Learning Objective

After completing and discussing this case, you should be able to:

  1. Review and analyze financial statement information relating to a company's balance sheet and income statement accounts using horizontal and vertical analysis method.
  2. Identify potential fraudulent financial accounts for closer scrutiny.
  3. Understand one method used to estimate the loss from the destruction of the out‐of‐sight (destroyed) inventory (cost of goods sold as a percent of gross receipts).
  4. Be able to use one ratio (days sales of inventory) to detect potentially misstated inventory balances.

 

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