Flash Technologies

7.

Tableau Excel 1

- In 2008, We can see troughout this figures that the amount of the fraud is 1,1 times bigger than the original net income and 22,7 times bigger that the limit of a normal fraud amount (5% of the original net income).

The situation gets worst in 2009. The amount of the fraud is 4,3 times the bottom line net income and 86 times the reasonable amount of a fraud.

Tableau Exel 2

- Briefly describe your calculation :

The point of a material misstatement is reached when the fraud represents 5% of the total net income. In other words, the net income misstatement is reached when it is 95% of the bottom-line net income.

- The PCAOB has not established a Bright line définition of materiality, this is why the amount of the fraud was so much High.

- Why we think bright line materiality guidance should be rovided ?

Because there was no bright line materiality guidance provided, the amount of the fraud was enormous. The amount of the fraud was so much important because of control weaknesses, that permitted fraud to occur.

Koss should be required to have auditors asses its internal controls. : to evaluate its planning and budgeting processes (to have a profit plan and the discipline to rigourously evaluate itself periodically against test plan).

Koss company has to exercise a degree of oversight that ensures that management sets goals for itself, and that management is evaluated against those goals. 

8.

- Current ratio increased : the decrease of the total liabilities is much more important than the one of the total assets. Every year, there was a decrease both of the accrued liabilities and the curents assets.

- Account receivable turn over : the level of the account receivable was 5 to 6 times higher than the one of the average accounts receivable. .That was the case every year since 2005. The explanation is an important decrease of the bank account balance (accounts receivable inventory)

- Debt to Equity ratio : Around...