Part 1: Risks in Sales Cycle
The sales cycle has historically been the area where most fraud has been committed. In an effort to recognize high levels of revenue and net income, companies have resorted to aggressive revenue recognition schemes. Use the South University Online Library or the Internet to research revenue recognition and the opportunity for fraud in the sales cycle. Answer the following questions with regard to this high risk cycle:
- What are some common ways in which a company can manipulate its sales numbers?
- Do you think invoicing done within the last week of the accounting period should be more heavily scrutinized for fraud? Why?
- Do you think using a computerized system allows for more fraud or prevents fraud? Why?
Part 2: Financial Statements
Financial statements are a formal record of the financial activities of a business. There are typically four basic financial statements. Use the South University Online Library or the Internet to research financial statements. Based on your research and understanding, answer the following questions:
- What are the four basic financial statements and how are they interrelated?
- What information is found in each and what is its purpose?
- If you could only choose one financial statement to try and evaluate how the company was doing, which would it be and why?