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Case examination of f c international

Internal Control, Bankruptcy, Financial Statement Analysis, Auditing

Research from Essay:

FC International Incorporation.

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Defining the difficulties and Trouble Statements

The case illustrated a huge scale scams that had plagued the F C. international Inc. during 1990s.

The case discloses challenging issues facing stakeholders in executing valuation of any publicly shown company

The situation also highlights a dilemma that can deal with top business owners who plan not taking part in the monetary frauds of the company

The fraud strategies were become inflating the corporation financial information and over rate the stocks.

The company leading executives inflated sales earnings and overstating period-ending inventories in the nineties.

For example , the barrels labeled as high targeted flavors were filled with water.

Major reason for the problem was your fraud that had perpetuated the company in the 1990s.

The effect of the fraudulence made the company to record financial loss during the period.

Sale revenues declined that made the organization to record a net damage.

Moreover, the organization would not be able to raise banking institutions loans with its financial documents.

The company probably would not be able to raise shares in the public using its financial complications.

Analysis of the Case Data

The case shows that a firm that falls short of an internal control system confronts the risk of internal frauds that may lead to individual bankruptcy.

Part of the challenges was that the business concealed the true financial data from the Farreneheit C. 3rd party auditors.

The executives likewise diverted the attention of the auditors from its suspect activities.

The organization cumulative pretax earnings were overstated to approximately $8 million in 1990s.

In the fiscal 1992, FC overstated its pretax net damage that reached $3. 8 million.

Furthermore, FC’s economic data were distorted methodically during the first quarter of 93 fiscal season.

Approximately $1. 5 million worth of inventory could not be located and made up.

The case discloses the FC had inventory problems really worth between $3- 4 hundreds of thousands.

Generating Alternatives

Different alternatives can be employed by company to solve the problems

Initially, the company has to design powerful internal control systems compatible to the Section 404 of SOX (Sarbanes-Oxley) Act.

Furthermore, the company will need to use exterior auditors to carry out a regular auditing in the company economical records.

The internal auditor must not perform similar function of both external and internal auditor.

Exterior auditor ought to carry out the auditing in the company financial records for a fiscal period before it is published inside the annual survey.

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