Fraud Examination 4th Edition by Steve Albrecht,Chad Albrecht,Conan Albrecht ,Mark Zimbelman

Exercise 88

Tool Co. is a medium-sized company that buys copper rod and plastic materials to produce insulated copper wiring. Tool Co. operates out of a single building of about 500,000 square feet that includes office space (3%), production area (57%), shipping and receiving (15%), and finished goods and raw materials inventory warehousing (25%). You have gathered the following data about the company's inventories and performance, and now you are ready to conduct an analysis on these numbers to discover possible fraud symptoms.

1. How would you go about looking for red flags
2. Do you think red flags of possible fraud are present in 2010 By comparing these numbers to Sales you can do a vertical analysis. To do so, assume that Sales were $8,450,000 and 8,150,000 for 2010 and 2009, respectively. Also, Cost of Goods Sold were $6,242,500 and $6,080,000 for 2010 and 2009, respectively