Comptronix Corporation Case 4.2

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Case 4.2

Comptronix Corporation

identifying inherent risk and control risk factors

Mark S. Beasley
Frank A. Buckless
Steven M. Glover
Douglas F. Prawitt

it was 9:30 A.M. on a monday morning when the call came through. "hi dr mitchell, do you have a minute?

"sure" the professor replied

"i am on of your former students, but if you don't mind, i would prefer to remain anymous. i think it is best for both us if i not reveal my name or my company to you. i am concerned that the senior executives of the company where i serve as controller just provided our local bank fraudulently misstated financial statements. although they acted like they appreciated my desires for perfection and exactness, they made me feel like it was my lack of experience in tehreal world that kept me from having a more practical perspective to a common business practice. i need some fast advice about what to do. currently, may i briefly describe what's going on adn get some input from you?" she asked.

"go ahead, let me see if there some way i can help." responded dr mitchell

"i am the controller of a privately-held, small, start up company that i joined three and one-half months ago. on friday of last week, the company's ceo met with representatives of the bank thaht funds the company's line of credit. the company is experiencing a severe cash shortage, and the bank recently halted funding the line of credit until we could present our most recent operating results. fortunately, the student clerk is currently taking your auditing course, where financial statement fraud is a topic, and he was uncomfortable with what had transpired.it was at that meeting, just three days ago,that our senior executive team knowingly submitted financial statements to the bank that overstated sales and receivable accounts.

"earlier on friday, prior to the bank meeting, i vehemently refused to sign the commitment letter required by the bank because of my concerns about the inclusion of...
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