Apollo Shoes Company Analysis
While evaluating Apollo Shoes, there are some areas of concern that are potential fraudschemes. The fraud can lead to the entire collapse/demise of the company if not corrected.These will also affect the share value and investor confidence. An overview of the process of investigation along with recommendations for the company.As with any company, revenue recognition is an important part of operations of a ApolloShoes. As stated in GAAP standards, revenue generated must be realistic and recognizable.Revenue is recognized when the sale is complete.
The sale is approved or paid for and theproduct is handed to the customer or mailed to the desired location. When reviewing the booksfor Apollo Shoes, the numbers are inconsistent with the accounts receivable. Confirmationreceived from customers were in line with the account balances.
This raised a flag of concernfor revenues being misstated. The difference doesn’t appear to make a considerable increase incash flow, but the issue needs to be addressed and corrected before the difference is larger.
The capitalization policy of assets can also beevaluated for accuracy and possible changes that need to be made.
The damaged the Apollo
Financial Statement Fraud Schemes 3Shoes building sustained from the hurricane were funded and capitalized. The same chargescould also have been applied for routine maintenance, which would show the expense twice.Apollo shoes was affected by a recent hurricane and the potential of charges being postedin renovation and routine maintenance.The invoices for system analysis consulting with Professor Josephine Mandeville of $200,000 needs to be examined and clarified. This seems to be high for evaluation and shouldnot be included in the capitalization policy if it occurred after the conversion date. This willimpact the expenses of the company in the short term and the long term.Depreciation schedules need to be evaluated in regard to the life of the equipment and thetype of depreciation utilized. The assets need to be monitored for compliance with GAAP.Assets need to be re-evaluated for value and life expectancy for depreciation and book values.Inventory Items that stand out are the standing inventory that is of uncommon sizes and long-standing boxes which were on pallets.
The obsolescence reserve seems to be almost the totalinventory for the Siren shoes. The men’s spotlight size 23 shoes in the warehouse need to beeliminated from the inventory and destroyed or removed. The tracking process for inventoryneeds to be counted by employees that are not involved with ordering and recording the items onthe books. Better use of the inventory tracking system needs to be pursued for future trainingand or implementation for employees. Standing inventory needs to be evaluated and adetermination for future benefit or elimination needs to be determined. The warehouse needs toensure that all items are verified and recorded regularly. The sales, shipping and recording process needs to be followed and checked by management.
Conflict of Interest Financial Statement Fraud Schemes
While evaluating Apollo Shoes, there are some areas of concern that are potential fraud schemes. Fraud can lead to the entire collapse of a company if not corrected, and will also affect share value and investor confidence. This paper provides an overview of the process of investigation along with recommendations for the company. As with any company, revenue recognition is an important part of operations for Apollo Shoes. Generally accepted accounting principles (GAAP) requires revenue generated to be realistic and recognizable. Revenue is recognized when a sale is completed, and the sale is completed when it has been paid for, and the product is handed to the customer or mailed to the desired location. Sales may be paid for up front, or on credit and recorded as an account receivable.
When reviewing the books for Apollo Shoes, the numbers are inconsistent with the accounts receivable. Confirmations received from customers were not in line with the account balances. This raised a flag of concern for revenues being misstated. The difference doesn’t appear to make a considerable increase in cash flow, but the issue needs to be addressed and corrected before the difference becomes larger. This can also be an indication of revenue misstatements. When there are discrepancies in the financial statements obtained from the company and the financial institution, further investigation must be performed.
Fixed Assets
There are some common forms of fraud in relation to fixed assets, concealment, misuse, and improper classification. All of these have an impact on the book value for the organization and the equity for the shareholders. The organization is responsible to record assets in the correct account for tracking and valuation. The fixed assets can also be traced from the beginning of the year to the end for verification of existence and/or write off of assets. The capitalization policy of assets can also be evaluated for…
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Financial Statement Fraud Schemes 4
With the purchase of the operating facility and equipment and the lease of a second facility fromtwo previous directors, the relationship and value of the items need to be investigated. The valueof the building and equipment of $823,906 could be out of the ordinary. The companyIn conclusion, financial statement fraud compromises the credibility of the company if they are not corrected. It is critical for Apollo Shoes to portray an image of stability, honesty andintegrity to grow into a long-term operation. Fraudulent activity will also affect potentialinvestors and profits of the company. These are steps to help expose possible fraudulentactivities and to help prevent future issues.
Financial Statement Fraud Schemes 5ReferencesLouwers, T. J., & Reynolds, J. K. (2007). APOLLO SHOES, INC. An Audit Case to Accompany.Louwers, T., Ramsay, R., Sinason, D., & Strawser, J. (2007). Auditing & assurance services: Alook beneath the surface(2nd ed.). New York: McGraw-Hill/Irwin.Wells, J. (2005).Principles of fraud examination.Hoboken, NJ: Wiley.Activity (2)
