Article brief Example | Topics and Well Written Essays - 750 words

Brief - Article Example The methodology used by the study to come up with a fraud model involved three steps. The first step was to data of a public company from 1995 to 2002. A sample of 100 companies was split into fraud and non-fraud companies (McKee, 2014). The third step was to test 15 predictive variables to determine those that were good predictors of fraud status. The fraud companies were selected from SEC Enforcement Release that provided publicly reported fraud. Non-fraud companies were matched with the fraud companies in terms of three criteria including market value, positive change of 25% in net income, and standard industrial classification (McKee, 2014). The predictive variables were derived from prior research literature. Analysis of the data involved binary logistic regression using fraud status as the variable to be predicted. The variables used when analysing the 15 predictive variables include company size, auditor tenure, and McKee-Lensberg bankruptcy probability. The fraud model was tested with 91 companies which were in the original sample. The other 9 companies not included in testing did not have data for at least one of the three variables used to analyse the predictive variables (McKee, 2014). A company with fraud probability greater than 50 was regarded as a fraud company while a company with less than 50% probability of fraud was regarded as a non-fraud company. The results of the study are that the model predicted 63 of the tested companies’ fraud status correctly. This reflected 69.2% level of accuracy. The model also predicted fraud status of 28 companies incorrectly, reflecting 30.8% rate of error. This model can be compared favourably to the fraud model developed by Alden et al (2012) which showed 75% accuracy of training rates and 64% accuracy of validation. This article is important because it provides a fraud model that can be used by auditors to develop standards

Runway Company Essay Example | Topics and Well Written Essays - 750 words

Runway Company - Essay Example The twenty five dollar ($ 25) would be transferred to the existing customer account if and only if the referred new customer purchase item from the company’s website. Moreover, after transferring of twenty five dollars ($ 25) to the account of the existing customer, the money can only be utilized by the customer on the purchasing of new items from the company’s website. The case study pertains to referral credit, in this regard; the document presents a thorough discussion on the said topic. It is pertinent to state that the referral credit should be recorded in the income statement as a marketing expense and this money is spent in an effort to bring in more clients for the company. The company is spending additional money to attain more customers and is expanding its scope. As a marketing strategy, the company is using its existing customer base to bring in more customers by offering them incentives on referring the site to other people. In the long run this additional money spent in the form of referral credits will be beneficial for the company as it will result in an increase in the sales and revenues. It cannot be recorded as a reduction in revenues as this will not provide a clear picture and future increase in customers and revenues cannot be attributed to this money spent. On the other hand, if twenty five dollars ($ 25) referral credit inducement offered to the Runway Discount Company’s customers, the offer can bring in more new customers for the company. And the new customers would be the vital reason for increasing sales, after the sales increment, the increase should explain if twenty five dollars ($ 25) amount is recorded as a marketing expense. Thus, it is suggested that in order to provide a more accurate depiction to the investors, it is advisable to record referral credit as a marketing expense (Gregory, 2011). When would Runway record the $ 25 Referral Credit? It is relevant to know that the Runway Company would record twen ty five dollars ($ 25) referral credit in its books at the time when the new customer referred by an old or existing customer, makes a purchase from Runway Company’s website. When the new customer makes a purchase, the Runway Company is bound to give twenty five dollars ($ 25) referral credit to its customer. In other words twenty five dollars ($ 25) become a liability of the company. However, if an existing customer refers the portal to a third person, not familiar to the website but the person after surfing the site does not make a purchase; the Runway Company will not record any referral credit in its books. When the new customer makes a purchase, twenty five dollars ($ 25) will be recorded as a referral fee in the