fraud case study 1
TRANSCRIPT
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Presentation on Environmental Audit
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Fraud Findings Outline
Fictitious Revenue/Sales
Improper Asset Valuation
Legal Requirements
Should Audit Report be Written?
What to Look for in an Environmental
Management Audit?
Benefits of Regular Audit
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Fictitious Sales/RevenueSales Increase
Receivables decrease
No Provision and Bad debts
Cash DecreaseCash Flows From Operating Activities
Negative
GMI Higher than nonmanipulator index butslightly lower from manipulator index
Days on inventory almost 5 months which
showing slow in selling activities
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Improper Asset ValuationCash Flows From Operating Activities
Negative
Inventory Turnover Increase Not provide
write offLengthy on Days in Receivables 227 days
on 2011 and 249 on 2010
Intangible assets may derived fromestimate figure due to suddenly appear in
2011
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Concealed Liabilities And ExpensesUnderstating liabilities and expenses is one of
the ways financial statements can be
manipulated.
When liabilities are concealed, equity, assets,
and/or net earnings are inflated.
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Concealed Liabilities And Expenses
Red Flags 1
Recurring negative cash flows from operations or an
inability to generate cash flows from operationswhile reporting earnings and earnings growth.
Can you find this at HoyongHayang Financial
Statement???
Cash Flows From Operating Activities Negative forTwo consecutive years 2010-2011
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Concealed Liabilities And Expenses
Red Flags 1
Why the Cash Flows From OperatingActivities Negative for Two consecutive years
2010-2011 while your sales revenue having a
good growth and surprisingly the cash andbank balance decreased by 27.54%????
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Concealed Liabilities And Expenses
Red Flags 1
HoyongHayang is suspected made a fictitioussales revenue which is to proof that our first
finding is correct
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Concealed Liabilities And Expenses
Red Flags 2
Assets, liabilities, revenues, or expenses based onsignificant estimates that involve subjective
Judgments or uncertainties that are difficult tocorroborate.
So what about with this???
Figure from Intangible asset amounted RM7,279,000may derived base on estimation figure due tosuddenly appear in 2011 even worse it suppose to berecorded under expenses (Suspected CapitalizingThe Expenses)
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Concealed Liabilities And Expenses
Red Flags 2
So what if this transaction recorded under theexpenses???
HoyongHayang will suffer another majorlosses as per 2008 and even worse after
made fictitious sales revenue they still
couldnt make a profit
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Recurring negative cash flows from
operations or an inability to generate cashflows from operations while reporting
earnings and earnings growth.
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Improper Disclosure On Unusual Activities
Advances to log supplier suppose to be
recorded on current asset instead of non
current asset
Reason may be to avoid current ratio resultgoes to extremely high. CR 2011 is 3.33
and it may go to 4.24
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Timing Differences
Early recognition on sales/revenue on year
2010
Slightly increase in trade receivable for year
2009 to 2010
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