The SignPro Limited printing company operates primarily in Ontario. This
well-known printing company designs signs, posters, and billboards in the
Greater Toronto Area. In the past few months, shareholders of SignPro Limited
have contacted ACME Consultants & Analysis Firm about numerous
irregularities in the oversight of their business. It has been noted that these
irregularities raise several red flags among the majority shareholders.
The first is that during the Covid 19 Pandemic, revenues have
significantly increased despite the decline of others in the industry, while
expenses have not increased in accordance.
Additionally, the financial statements showed a lack of sufficient details
as well as a lack of consistency. It was observed that the company submitted
financial statements that differed from those contained in its annual reports and
SEC filings.
Last but not least, it has been reported that despite a major economic
downturn, year-end employee bonuses were received due to the company
achieving all sales targets.
Schemes Indicating Financial
Statement Fraud
In light of our preliminary analysis, we have identified the following schemes through
which SignPro Limited may be potentially responsible for fraud on its financial
statements:
1. Fictitious Revenues: One of the first signs of potentially fraudulent activity was
the increased revenue during the Covid outbreak despite a drastic decline in
economic business activities. It is possible that the company created fake
sales to create a higher than the original revenue estimate.
2.
Misclassification of expenses: As the company may not be able to affect its
financial statements directly, it may misclassify the expenses to make them appear
as capital expenditures to portray the impression that the company is earning more
revenue.
3.
Misusing reserves: Our analysis indicated that the company's financial
statements were inconsistent. Financial statements for reports displaying high
revenue could have been manipulated and misused using company reserves like a
warranty for printing tools and bad debt.
4.
Improper expense recognition: We observed that the company issued
employee bonuses by claiming that targeted sales had been achieved. To make the
profits appear higher than they are, we suspect that the company could have
achieved this by delaying the recognition of expenses.
Individuals suspected.
Thomas Shephard (CEO) As CEO Mr Shephard is responsible for a company's
financial statements and may be involved in financial statement fraud if the company
is under pressure to meet earnings targets or are trying to hide poor financial
performance.
Jack Dawson (Senior Accountant) - Mr. Dawson is responsible for preparing a
company's financial statements and may be involved in financial statement fraud as
he had opportunity to intentionally misstate financial statements or fail to report
suspicious transactions.
Maria Thompson (Sales Person)
Katie Rowan (Sales Person)
They may be involved in financial statement fraud if they are incentivized to make
sales targets and create fake sales transactions or artificially inflate the value of
actual sales to achieve wages and bonuses.
Charles Harris (Other Employee)
Kim Coles (Other Employee)
Timmy Turner (Other Employee)
Christopher Brown (Other Employee)
Other employees within a company may be involved in financial statement fraud as
they are faced with pressure from management to achieve a target performance.