Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Mountain State Sporting Goods

No description
by

Caleigh Miller

on 14 April 2015

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Mountain State Sporting Goods

Mountain State Sporting Goods
Bethany Spates, Caleigh Miller, Salem Ameri
Background
Kentucky Corporation built in 1993 by J.D. Smith
Conclusion:
There is a strong possibility that audited financial statements would reduce fraudulent activity, but it is also possible that some fraud may be missed because of collusion among Workman and Hess.
Sources:
Major Accounting Policies
Inventory Accounting
Fraud Hypothesis
Opportunity for fraud is more prevalent because a lack of audited financial statements reduces the likelihood of uncovering fraud.
Fraud Triangle
Fraud Triangle Relating to Mountain State
Smith passes in 2006
Thomas A. Workman took control in 2007
Business valued at $350,000 in 2006
Large merchandise mix
Converted to the periodic method
Use FIFO method
Use accrual method of accounting
Opportunity
Pressure
Rationalization
Motivates the crime.

Ex. financial trouble, productivity expectations, etc.
Justifies the crime.

Ex. "I'll pay it back", "I didn't get a raise so I deserve this", etc.
Method used for the crime.

Ex. lack of internal controls, not checking inventory, etc
Pressure
Workman desired a certain type of lifestyle.
Opportunity
Financial Statements
Accounting for pawn loans
Lack of family in management
Key employees leaving
Lack of segregation of duties
Lack of auditor independence
Repayment of loans
Accounting method
Switch of inventory methods
Rationalization
Bonuses were not awarded until goals were met
"I'm getting what I deserve."
Journal Entry Testing
Financial Statement Analysis
1. JEs made to unrelated, unusual, or seldom-used accounts
8/20/2006 Outside Services 15,000

Leasehold Improvements 15,000
3/01/2007 Sales 45,000

Loan from Employee 45,000
2. JEs made by individuals typically not part of the JE process
3. JEs recorded at the end of the period or as post-closing entries with little or no explanation
4. JEs containing round numbers or a consistent ending number
5. JEs applied to intercompany or related parties.
3/07/2008 Sales 15,000

Payroll Liabilities Payable 15,000
3/07/2008 Sales 10,000

Long Term Debt 10,000
3/09/2008 Cost of Goods Sold 6,000

Auto Lease 6,000
3/09/2008 Advertising and Promotion 12,500

Travel and Entertainment 12,500
Journal Entry Testing cont.
2006
2007
2008
2/28/2009 Equipment 40,000

Loan to Employees 40,000
3/09/2008 Insurance Expense 5,000

Outside Labor 5,000
Key People
Sue Bryant
Anita Workman
Key People cont.
Thomas Workman
Charles Hess
Helped Smith
Accounting and Payroll Duties
"First 15 days were hell"
Limited involvement after 01/06/07
Married to Thomas Workman
Trained by Hess & Associates, CPA
Isn't full time
Work history
Relationship with Hess
Job duties
Final remarks
CPA since 1994
Doesn't audit
"Workman needs a good lawyer"
Income Statement
Balance Sheets
Cash Flows
Financial Ratios
http://www.acfe.com/fraud-triangle.aspx
http://www.rufusandrufus.com/mountain_state_sporting_goods.pdf
Appendices provided for the case
Full transcript