Crazy Eddie Case Study Example | Topics and Well Written Essays - 250 words

Crazy Eddie - Case Study Example Internal auditors are responsible for fraud at Crazy Eddie as they are the ones committing and concealing fraud to both external auditors and the general public (Buchholz, 2011). . The computations above do not indicate any problem at Crazy Eddie. The gross margin ratio of 24%, though it might not be conclusive, shows that the company is operating a healthy business and might be able to service its operating expenses. The inventory turnover ratio too, indicates that the company turnover is high and hence healthy at 482%. 2. There were several barriers to independence at Crazy Eddie. Auditors at Crazy Eddie’s case were not able to detect fraud due high-level fraud cover up from suppliers’ side to its consumers. Fraud occurred on many fronts; liabilities and expenditures, asset valuations, fictitious revenue, disclosures and accounting period differences. Liabilities and expenses were concealed like unpaid bills wouldn’t be declared and paid in the next financial year of held for long periods. Accounting periods would not be cut off at regular intervals in order to add good sales occurring after what should have been a closed book, to inflate revenue falsely. On assets, some were overvalued or the company employed tricks like borrowing the merchandise that would not be paid for immediately. They also used to ship stock from one store to another as auditing was spread out in stores hence double-counting (Knapp, 2013). 3. If I were a partner to audit Crazy Eddie, I would accept to audit this company thoroughly as it was a family entity with all management positions reserved for family members. This was one sign of some weakness as family members can manipulate accounting procedures, and lack of proper conduct can be compromised. Very important too, was the fact that this company was characterized by hype about its success. The crazy hype should be a