Both Jonathan Swift and Frederick Douglass

651 Words3 Pages
(1) One of the inherent risks is that Medlin would create a fictitious sale of fictitious inventory and would record a re-deposited check as payment received for the sale. Since payments for the fictitious sales were recorded simultaneously with creation of the account receivable, there will be no sales were realized or recorded in the actual Comptronix's account. Another inherent risk is Hebding instructed Medlin to shift the fictitious inventory into an equipment account, and Medlin and Shifflett prepared fake invoices from third-party vendors. They would manually draw a check to the vendor for payment for the equipment. They create the fictitious purchases of equipment which form a potential inherent risk for the company. Moreover, it would cause an overstatement of equipment; Finally, I found another inherent risk is inflated assets or overstate inventory. Hebding instructed Medlin to artificially reduce operating expenses and increase inventory. They want to inflate inventory, in order to they can make adjustments to costs and inventory in the financial statements without documentation or support. It cause overstate inventory and understate the cost. Therefore, this has become the key factor of inherent risk. (2) The first risk is Company does not set internal oversight Institutions. In this case, shareholders did not set the relevant oversight institutes, but they firmly believe CEO (Hebding) decision, which led to the failure of internal control environment, in this case, Hebding can create different fictional accounts, aimed at the data meet the requirements of shareholders, but his aim is to deceive shareholders, and to reap more benefits. For example, Hebding instructed his employee to make false account such as understate expense, overstate equipment and inventory and so on. Those behaviors can prove company lack of oversight institutes for

More about Both Jonathan Swift and Frederick Douglass

Open Document