Crazy Eddie Case Summary

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Crazy Eddie was a fast-growing consumer electronics chain in the 1980s. The founder of Crazy Eddie are Eddile Antar, and the key business position in this company are filled by Antar family’s members. In order to avoid paying more taxes on their business income, the Antar family had decided to skim large amounts of cash from their dairly business sales. The family made more money by skimming cash, and they deposited those cash in Israeli banks to avoid tracking in U.S. However, the family felt unsatisfied with the cash they made and they decided to take Crazy Eddile public. The Antar family had started to reduced the skimming operation and had transfered their large amount of money from the bank in Israel to a bank in Panama. In addition, they had reported many fraud store sales to make the company look very profitable and fast-growing. The large amount of sales made Crazy Eddile look very sucessful and attracted more inverstos to buy their stocks. Further, Crazy Eddie’ s stocks sold out for a large profits, but the stockholders had lost great amount of money when they filed…show more content…
Even when the analytical procedures indicated significant red flag, but auditors still did not pay special attention to it. Therefore, the inventory were more than quadrupled between 1984 and 1987. Auditors did not count inventories properly during the process of inventory counting, they asked people to move the inventory when the inventory in the warehouse was stacked and placed in rows, therefore, the inventory count was inaccurate. Auditors should ask the company to provide a detailed inventory record so that they can have something in mind during inventory counting. According to AU-C Section 501 Audit Evidence-Specific Considerations for Selected Items, Paragraph .11- if inventory is material to the financial statements, the auditor should obtain sufficient appropriate audit evidence regarding the existence and condition of inventory
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