Doughtie’s Foods, Inc.
William Nashwinter was appointed as a salesperson in the Doughtie’s foods inc. in the late 1970s. He was a young and ambitious man. His hard work soon promoted him to a general manager position in the Gravins Division of Doughtie’s. It was a large warehouse which wholesaled frozen food products to retail outlets. Nashwinter realized that managing a big wholesale was a difficult job and he started getting complains from the headquarters of his poor performances. Nashwinter tried hard to improve the situation but he didn’t see any improvement. Eventually, he started making false inventory on his monthly performance reports to headquarters. Nashwinter increased the gross profits by increasing inventory balance and reducing cost of goods sold. He thought that the Division will make enough profit one day to justify his fake numbers but that day never came. Finally, in 1982, Nashwinter told his superior about inflating the inventory account and he was fired immediately. After determining the inventory errors in Gravin’s accounting records, it was found that Doughtie’s 1980 and 1981 income was overstated by 15 percent and 39 percent respectively. In 1980 and 1981, Doughtie’s was audited by Thomas Wilson, the audit manager, and Frank pollard, the audit supervisor, from CPA firm of Goodman and Company. The SEC criticized Wilson and pollard for their failure to severely audit Doughtie’s inventory account. The SEC maintained that Wilson and Pollard should have noted that inventory was the largest item on Doughtie’s balance sheet and there were many weaknesses in the internal control for that inventory. Moreover, they should have noted that Gravin’s inventory increased rapidly during 1980 and 1981. Nashwinter testified to the SEC that he often made excuses for the missing inventory and the auditors were always relaxed during auditing. This article presents the fraud and negligence case. Nashwinter committed fraud by...
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