Apollo Shoes Casebook

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Identify potential financial statement fraud schemes by using the Apollo Shoes Casebook. Describe the types of evidence you would look for to determine whether fraud is occurring. Write a business brief of 1050 words that outlines how you will use the substantive procedures for detecting irregularities in cash, accounts payable, accounts receivable, inventory, fixed assets and payroll to analyze potential schemes in the Apollo Shoes Company.
The cash flow from operating activities for Apollo Shoes Company has increased from $1,745 to $4,371. However, there is potential scope for fraud. There can be payments that look legitimate but are fraudulently made, or there are cash receipts that are simply not recorded. However, there are substantive procedures that the auditor can follow that will help detect the fraud. These procedures are tracing the source of documents. For instance, if an unwarranted payment has been made then tracing will expose the fraud. The other tests that the auditor should perform are vouching or examining the receipts and documents related to the fraud. Another substantive test that can expose cash irregularity fraud is re-performance of client activities. If cash receipts are recorded separately by the auditor and the result is compared with that of the client a number of cash irregularities at Apollo Shoes Company will be exposed.
One of the frauds that is likely to take place at Apollo Shoes Company is related to accounts payable. The potential financial statement fraud scheme is that accounts payable are underreported. The substantive procedures that the auditor should carry out is to compare the list of the trade payables with those of prior year, compare the number of day's purchases in the trade payables with previous year, and compare the accrual with the volume of ...