Accounting Question

Scenario

You are a fraud examiner hired by Golden Star Manufacturing to investigate allegations of fraud. The CEO, CFO, and controller have been friends for 20 years, and a recent background check of the controller reveals she was fired from her last three jobs. Your supervisor has asked you to use fraud detection methods, including calculating horizontal, vertical, and ratio analyses in Excel, to determine if there are red flags indicating fraud could be occurring. In an executive summary to the board of directors, you will provide evidence of fraud and how this fraud could be detected.

The skills practiced in this activity will help to support you in your project.

Directions

Use the knowledge you gained from this module’s resources to apply fraud detection methods and describe fraud risks in the organization. There are two parts to this activity.

Specifically, you must address the following rubric criteria:

Part One: Excel Calculations

For Part One, use the template in the What to Submit section to show your work in performing the financial statement analysis.

1. Calculate the balance sheet analyses to support evidence of potential fraud. Include the following in your response:
   1. The balance sheet horizontal analysis
   2. The balance sheet vertical analysis for Year 1
   3. The balance sheet vertical analysis for Year 2
2. Calculate the income statement analyses to support evidence of potential fraud. Include the following in your response:
   1. The income statement horizontal analysis
   2. The income statement vertical analysis for Year 1
   3. The income statement vertical analysis for Year 2
3. Calculate the ratio analyses for the data set provided to show evidence of potential fraud. Include the following in your response:
   1. The current ratio
   2. The quick ratio
   3. The sales/receivables ratio
   4. The number of days sales in accounts receivable ratio
   5. The inventory turnover ratio
   6. The debt to assets ratio
   7. The return on assets ratio
   8. The profit margin ratio

Part Two: Executive Summary

For Part Two, write an executive summary in a separate Microsoft Word document that describes the data from the calculations you did in Part One.

1. Summarize how the evidence from the calculations helped to detect the fraud.
2. Describe methods of fraud detection that could be used in the scenario.
3. Explain internal controls that the organization can use to mitigate the risk of and detect fraud.

What to Submit

Excel Calculations

Submit your calculations in Part One of this activity by completing the Golden Star Manufacturing Financial Statements Template, which also provides the financial statement data for the organization in the scenario.

Executive Summary

Complete the Part Two executive summary in a separate 1- to 2-page Word document with double spacing, 12-point Times New Roman font, and one-inch margins. Sources should be cited according to APA style.