ZZZZ Best appeared to be an instant success. However, it was actually a front to attract investments for a massive Ponzi scheme. Business pressures and unpaid bills caused a young entrepreneur to perpetrate one of the largest accounting frauds. Minkow and his employees never performed any building restorations.
Lessons from the Zzzz Best Case Essay introduction. According to the video, ZZZZ Best was founded by Barry Minkow in ; when he was sixteen years old, it started as a carpet cleaning company.
But, due to high competition in the industry, low entry barriers, and bad internal control, this young entrepreneur started to have cash flow problems, thus creating a shortage of working capital.
As a result of the financial pressure, he started to commit fraud by creating false accounts receivable and sales, false documents using photocopies of real documents ; he also forged credit card applications, staged theft, used bogus financial statements.
Moreover, he created two property management companies, and used these two companies to generate paper profit. We will write a custom essay sample on Financial Statement Fraud: They need to present a professional skeptical mind on their engagements, particularly during audit planning and evaluation of audit evidence.
At the end of the audit, the auditors must make sure that they have obtained reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Discuss typical Financial Statement Fraud. The manipulation of those statements Zzzz best company inc.
case study businesses to look attractive to investors and creditors. The majority of these frauds fall into two major categories. In the manipulation of timing, revenues from a later period are recorded into the current period, increasing revenues for the current period.
Also Expenses are recorded in later period decreasing the expenses for the current period. For falsifying entries, a company will enter transactions that seem to affect it accounts receivable, but when the whole transaction is considered, they do not create any gain. For example, non-revenue gains may be recorded as sales.
Investment income, gains on the sale of assets will be recorded as sales revenue to make the core business appear healthy. Items like discounts and rebates from suppliers and other non-revenue injections of money from loans will also be recorded as sales.
Discuss common reasons why financial statement fraud is committed Financial statement fraud is committed by individuals either by need or greed.
For example, the following factors can trigger individuals or companies to falsify their financial statements thus committing fraud: Also they will need to rationalize the actions as justifiable.
The individuals committing the fraud must first convince themselves that their behavior is acceptable or will be temporary. He had a lot of competition and there was a low margin of profit in his line of business, therefore, he needed money to keep his business running as a result he tried to get any amount of money from anywhere and anyone.
He tarted using user loans-borrowing money from person A and give to person B and borrowing money from person C to pay back the loan for person B. As a result, he got himself in debts; and he started looking for ways to make his company appear more lucrative than it was. He created 10, phony documents to cheat creditors for money, and started his Perpetration Restoration Fraud- making more money than really exists and borrowing more money than the company really needs to borrow it is also called Building Excuse.
He made the bankers believe, that his company had the ability to pay back the loans. How did Minkow use the competition of CPA firms to get his auditors less willing to press difficult issues? He would say that there are two or three other firms who have informed him that they want to audit his company.
Therefore; he gave CPA firms the impression that he can easily switch to their competitor if they gave him a hard time. The wives think Barry Minkow was a nice boy, as a result; the auditors would not want to go against their own wives. When the auditor wanted to check whether or not the company exists and the details of the statements, he tells the auditors that they called his customers and business associates the last time the auditors came to review his business.
And if they call them again, it would affect and hurts his business.Case ZZZZ Best Company, Inc, 1. Ernst & Whinney audit firm suffered tremendously from the backlash of ZZZZ Best’s case.
One of the issues stemming from ZZZZ Best’s case is the difference between a review and an audit as evidence by civil suit filed by a California bank against the firm. Case ZZZZ Best Company, Inc. Delta. Describe the elements of the Fraud Triangle that apply to this case. Assume you are the perpetrator.
Is there a better way to . Case ZZZZ Best Company, Inc. 1. A review is similar to an audit but is less in scope and only provides limited assurance in regards to the presentation of the financial statement. This differs with an audit that gives reasonable assurance that no material errors or illegal acts are detected%(19).
What was the 'ZZZZ Best' ZZZZ Best, founded by Barry Minkow, was a carpet-cleaning and restoration company that served as a front for a Ponzi scheme. The company went public in December and.
Zzzz best company inc case study. Zzzz best company inc images presentation. Zzzz best company inc images presentation ppt. Zzzz best company inc images. Compare Search (Please select at least 2 keywords) Most Searched Keywords.
Hadoop for beginners 1. Va piv card remote access 2. Nov 09, · In ZZZZ Best’s case, the internal control of Independence was manipulated. When analyzing ZZZZ Best’s financials, the auditors should have compared the changes in numbers from year to year.
Simply looking at the numbers and conducting a ratio analysis would have pointed out numerous discrepancies that were present.