Trueblood Case Analysis 08-9: Fraud and Illegal Acts
Trueblood Case Analysis
08-9: Fraud and Illegal Acts
Sean Chang, Billie Sayavong, John Hamilton,
ACC 695M
September 24, 2011
Background
Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company. The engagement partner received a call from the company’s director of ethics and compliance, who stated that an anonymous employee of the company had called into the hotline questioning a sales transaction that seemed suspect. The sales transaction occurred at year-end on December 31, 2010, which seemed suspicious because of the timing of the transaction and effect the transaction had on the year-end figures. Specifically the employee noticed a sales invoice dated December 31, 2010 made out to a Mr. Sinaloa. This transaction was suspect for the employee because the company does not typically recognize revenue associated with products shipped to Mexico until Mr. Sinaloa presents the company with a confirmed sales order.
On March 15, 2011, Moore, Billings & Co., PLC was brought in to do a private investigation on the validity of the sales transactions made by Jersey Johnnie’s Surfboard and Mr. Sinaloa. On December 31, 2010, Moore, Billings & Co., PLC concluded that there were no signs of fraud from the sales transaction at year-end. The following are several findings by Moore, Billings & Co., PLC to confirm their results:
a) There was an oral agreement between Mr. Sinaloa and Jersey Johnnie’s Surfboard regarding a
08-9: Fraud and Illegal Acts
Sean Chang, Billie Sayavong, John Hamilton,
ACC 695M
September 24, 2011
Background
Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company. The engagement partner received a call from the company’s director of ethics and compliance, who stated that an anonymous employee of the company had called into the hotline questioning a sales transaction that seemed suspect. The sales transaction occurred at year-end on December 31, 2010, which seemed suspicious because of the timing of the transaction and effect the transaction had on the year-end figures. Specifically the employee noticed a sales invoice dated December 31, 2010 made out to a Mr. Sinaloa. This transaction was suspect for the employee because the company does not typically recognize revenue associated with products shipped to Mexico until Mr. Sinaloa presents the company with a confirmed sales order.
On March 15, 2011, Moore, Billings & Co., PLC was brought in to do a private investigation on the validity of the sales transactions made by Jersey Johnnie’s Surfboard and Mr. Sinaloa. On December 31, 2010, Moore, Billings & Co., PLC concluded that there were no signs of fraud from the sales transaction at year-end. The following are several findings by Moore, Billings & Co., PLC to confirm their results:
a) There was an oral agreement between Mr. Sinaloa and Jersey Johnnie’s Surfboard regarding a