Fraud
Identify potential financial statement fraud schemes at Apollo
In many instances the quantitative figures of companies can be misleading. The nature of generally accepted accounting principles (here forth referred to as GAAP), are such that they provide flexibility in determining appropriate financial figures. On occasion, management or executives may misrepresent these figures to make the company seem more or even less attractive during certain periods. For example, a company may take more losses in the current period, in order to seem more profitable in subsequent periods that follow. Likewise, companies may also seem to be more profitable than they are in an effort to hide substantial losses that have occurred in the business operations. Complicating the financial issue further is the fact many transactions don't appear within the financial statements at all. These transactions, called "Off-balance sheet transactions" can have a profound impact on the value placed on various companies including Apollo. This adroit financial engineering is often a result of a misalignment with company objectives with those of management, and can be very costly in regards to valuation of a business. As such, individuals must be aware of these miscalculations in financials and adjust financial statements accordingly based on reasonable expectations.
Describe the types of evidence that would determine if fraud is taking place
In regards to Apollo, we will discuss three aspects of the business in detail -Accounts receivable, Inventory, and Fixed Assets.
Accounts Receivable- First, an alarming figure within the income statement is that of bad debt expense. Here is where fraudulent activity occurs. To begin, the bad debt expense is the amount of receivables that Apollo deems uncollectable within a given period. As of 2010, that amount was $1,622,000. As a percentage of sales, which were $240,755,000 this amount was approximately .6%. This statistic alone is very favorable as it depicts Apollo's ability to manage credit well. However, in 2011, sales increased to $245,213,452.88 or approximately a 1.85%. During this period however, bad debt expense was 0. A 100% decline in bad debt expense within one year is alarming considering that also during that period, accounts receivable increased to approximately...
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