Edward Cummings Fraud

"Cummings participated in and was aware of the decision to improperly _______ by up to a week the recognition of accounts receivable and the receipt of product into inventory for purposes of recalculating the borrowing base."

What is one way QSGI personnel were able to circumvent the inventory controls?

• Personnel intentionally mislabeled inventory items to conceal theft.

• Inventory was shipped out again without being entered into the company’s books and records.

• Personnel created fictitious inventory records for goods that did not exist.

• Items were removed from physical inventory without being relieved from inventory on the books and records.

What did Cummings do to mislead auditors?

• He altered financial documents to misrepresent inventory transactions.

• He forged confirmation letters to validate the accuracy of AR.

• He omitted information about QSGI's internal control deficiencies.

• He colluded with management to create a cover-up.

What is one of the frauds that Edward Cummings committed?

• Tax evasion.

• Embezzlement of company funds.

• Insider trading.

• Improper acceleration of recognition of inventory and AR.

True or False: Cummings was unaware of the decision to improperly accelerate by up to a week the recognition of accounts receivable to increase the borrowing base.

• True

• False

What is the main reason that resulted in the falsification of QSGI’s books and records relating to inventory?

• Poor "tone at the top."

• Pressure to meet expectations.

• Internal controls deficiencies.

• Lack of training.

Why did efforts to introduce internal controls fail?

• Key personnel left.

• Inadequate training.

• Lack of experience with new employees.

• All of the above.

How did manufacturer policy help personnel circumvent internal controls?

• The policy was inadvertently designed to undermine internal controls.

• The policy helped hasten QSGI’s shift from selling machines to selling parts.

• The policy lacked specificity and strict enforcement.

• The policy incentivized behaviors that conflicted with internal controls.

True or False: Edward Cummings failed to omit the existence of significant deficiencies in the design or operation of QSGI's ICFR.

• True

• False

What was the reason why Cummings participated in the acceleration of recognition of inventory and AR?

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