10. Heirloom can defraud the Unusual decrease in the There is no mention of An external, independent bank by misstating its financial allowance or bad debt amounts. an external audit by statements in many ways. For independent CPAs. Financial statement analysis, such as example: Sales increase without a Analysis of bad debt to sales and allowance to - Understating its allowance and bad comparable increase in sales ratios to see if they are below those of debt expense (not writing off receivables; inventory; cost of past years and those of comparable customers uncollectible receivables and goods sold; and applicable in the same industry. the bad debt expense). expenses such as photographer Analysis of sales ratios, comparing sales to - Creating fictitious sales and notes and album expenses, embossing receivables; inventory; gross margin, cost of receivables. and shipping, and commissions. goods sold; and applicable expenses such as - Intentionally under or over stating album and photographer expenses, embossing the sales commission estimates. Sales commissions out of line and shipping, and commissions. with those of the industry or past years.
10. Heirloom can defraud the bank by misstating its financial statements in many ways. For example: - Understating its allowance and bad debt expense (not writing off uncollectible receivables and the bad debt expense). - Creating fictitious sales and notes receivables. - Intentionally under or over stating the sales commission estimates. Unusual decrease in the allowance or bad debt amounts. Sales increase without a comparable increase in receivables; inventory; cost of goods sold; and applicable expenses such as photographer and album expenses, embossing and shipping, and commissions. Sales commissions out of line with those of the industry or past years. There is no mention of an external audit by independent CPAs. An external, independent Financial statement analysis, such as Analysis of bad debt to sales and allowance to sales ratios to see if they are below those of past years and those of comparable customers in the same industry. Analysis of sales ratios, comparing sales to receivables; inventory; gross margin, cost of goods sold; and applicable expenses such as album and photographer expenses, embossing and shipping, and commissions.
rais12_SM_CH05.docx