1. Which financial accounts for ABC Company are affected by the fraudulent activ
ID: 2479344 • Letter: 1
Question
1. Which financial accounts for ABC Company are affected by the fraudulent activities and how much? Identify and calculate the monetary effects on financial accounts.
PART I: FINANCIAL IMPACT OF THE FRAUD
AMOUNT THAT COULD BE CALCULATED UNTIL NOW:
Parts taken out of the inventory and the related amount were invoiced without the knowledge of the customers, receivable sitting as open item in the system:
$50,801
Amount that was invoiced, signed with a fake stamp and collected from the customer in cash that was not posted in company accounts:
$14,146
Parts taken out of the inventory on the basis of open job orders but not physically present anywhere in the warehouse:
$36,396 (at cost)
Parts that were reserved in the system in the name of a customer but physically not present anywhere in the warehouse:
$30,814 (at cost)
Amount that was borrowed from the company but not paid back:
$6,500
Product code modifications made over 4 years (changing product codes of expensive auto parts stolen from the warehouse to paint product codes, an uncountable (liquid) product category)
$408,537*
Some auto parts taken out of the warehouse with unauthorized/unapproved job orders
$55,934
TOTAL CALCULATED AMOUNT: $603,128
* Examples for parts whose product codes were changed to paint are as follows: expensive accessories sold at the Boutique ($22,200), steel tire rim ($24,050), tyres ($11,100), injector ($6,660), Screen & Mirrors ($18,500), headlamps ($6,013), hydraulic suspension & compressor ($8,048), arm-rest tool ($4,625), indicator panel ($4,255), refrigerator ($2,775), cabrio-type car ceiling ($5,365)
ATTACHMENT 2: FINANCIALS
(All figures are in NZ'000)
ABC Company 31/12/XX
Balance Sheet
ASSETS
LIABILITIES
Banks
3,500
Loans
25,000
Trades Receivable
12,000
Trade Payables
30,000
Other Receivables
2,500
Other Payables
5,000
Investments
6,000
Accrued Liabilities
9,000
Inventories
35,000
Provisions
10,000
Property Plant Equipment- net
37,950
Paid Capital
10,000
Reserves
6,350
Current year P/L
1,600
TOTAL ASSETS
96,950
TOTAL LIABILITIES
96,950
Profit & Loss Statement
Revenues
100,000
Cost of Sales
85,000
Gross Profit
15,000
Operating Expenses
10,500
Operating Profit
4,500
Non-operating Expenses
2,500
Profit Before Tax
2,000
Tax
400
Profit After Tax
1,600
(All figures are in NZ'000)
ABC Company 31/12/XX
Balance Sheet
ASSETS
LIABILITIES
Banks
3,500
Loans
25,000
Trades Receivable
12,000
Trade Payables
30,000
Other Receivables
2,500
Other Payables
5,000
Investments
6,000
Accrued Liabilities
9,000
Inventories
35,000
Provisions
10,000
Property Plant Equipment- net
37,950
Paid Capital
10,000
Reserves
6,350
Current year P/L
1,600
TOTAL ASSETS
96,950
TOTAL LIABILITIES
96,950
Profit & Loss Statement
Revenues
100,000
Cost of Sales
85,000
Gross Profit
15,000
Operating Expenses
10,500
Operating Profit
4,500
Non-operating Expenses
2,500
Profit Before Tax
2,000
Tax
400
Profit After Tax
1,600
Explanation / Answer
Which financial accounts for ABC Company are affected by the fraudulent activities and how much? Identify and calculate the monetary effects on financial accounts.
1. Parts taken out of the inventory and the related amount were invoiced without the knowledge of the customers, receivable sitting as open item in the system:
$50,801 -
This affects the receivables and should be reduced from the receivables amount. It should b debited to a fraud account which should be charged to the retained earnings or a reserve.
2. Amount that was invoiced, signed with a fake stamp and collected from the customer in cash that was not posted in company accounts:
$14,146
This amount should be recovered from the employee and until then, it should be recognised in the company’s books as an accounts receivable.
3. Parts taken out of the inventory on the basis of open job orders but not physically present anywhere in the warehouse:
$36,396 (at cost)
The inventory must be debited with this amount , if it hasn’t already been. In addition, it should be recognised as a receivable claim or as an asset receivable under litigation.
4. Parts that were reserved in the system in the name of a customer but physically not present anywhere in the warehouse:
$30,814 (at cost)
The inventory must be debited with this amount , if it hasn’t already been. In addition, it should be recognised as a receivable claim or as an asset receivable under litigation.
5. Amount that was borrowed from the company but not paid back:
$6,500
It should be removed from the head ‘advance to emplyees’ and should be recognised as an asset under litigation.
6. Product code modifications made over 4 years (changing product codes of expensive auto parts stolen from the warehouse to paint product codes, an uncountable (liquid) product category)
$408,537*
This would be recognised as a loss.
7. Some auto parts taken out of the warehouse with unauthorized/unapproved job orders
$55,934
This would have no financial effect as the parts must have already been debited to the inventory when they would have been taken out.
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