Forensic Accounting | Case Study Report

FORENSIC ACCOUNTING

Table of Contents
Dick Smith Holding limited........................................................................................... 2
Review the corporate governance structure........................................................................2
Analyse financial performance & comparison with industry sector competitors...........................3
Consider non-financial elements..................................................................................... 4
Assess fraud risk & identify three areas of higher risk...........................................................5
Consider financial statement fraud...................................................................................6
Apply your knowledge of ASA 240, fraud triangle and fraud symptoms....................................7
Describe each fraud (4 in total), symptoms, and red flags.......................................................7
Recommend actions to proactively prevent the fraud or enable early identification – consider overall
actions & any specific to each fraud.................................................................................9
References.............................................................................................................. 12

Dick Smith Holding limited
Dick Smith was an Australian retail chain store who deals in selling electronic components,
electronic project kits, and consumer electronics. The retail store has expanded well in New
Zealand and it is not able remain successful in many countries. Dick Smith established the
organisation in 1968 in Sydney but they sold it to Woolworth limited. Further, it has 40
percent after two years. The organisation has closed in 2016 for four years, after the
acquisition by the Anchorage capital partners. It has an employee base of 3300 in 2015. ASX
disclosures take control out of Dick Smith`s assets and business, where sale processes was
not acceptable offer for the group for Australia and New Zealand, which offer group as
liquidation values (Abc.au.in., 2012).
A publically listed organisation (in 2015) under the corporation act (2001), at the end of
financial year in 2015, operating cash flows was negative near to $ 4 million where there is
an increase in inventory and supplier, which finally result into accounts payable. The
business is needed to take $71 debt to fund more sustainable for working capital. The
organisation reports a provision and toxic combination of facing same store and then lead to
shrinking gross profits (Trang, and Nga, 2017).
Review the corporate governance structure
Corporate governance avails most appropriate definition through which the companies is
directed and controlled. This gives leader of companies to give high level of understanding of
main attributes, which has to be implemented for the corporate governance. Corporate
governance affect the objectives of company that set and achieve, optimise the performance,
and then increase the confidence of investors (Henry, 2016).

Dick Smith has bad corporate governance, as it is not maintaining its transparency amongst
its stakeholders. It has led to collapse of corporation as professional accountants have been
attempted to reflect fraud events for last two years since Woolworth has purchased.
Analyse financial performance & comparison with industry sector competitors
The financial performance of the companies are evaluated with the help of ratio analysis. It is
tool, which analysis the elements of financial statements. The competitors is selected as JB
Hi-Fi holdings. Current ratio reflects the liquidity of the organisation and their position to
accomplish their short-term liabilities (Henry, 2016).
Computation of ratio analysis
Dick Smith holding limited JB Hi-Fi
Profitability Ratios 2015 2015
Net Profit Margin net profit/ revenue sales 0.03 0.37
Return on Equity net profit/ equity 0.22 0.42
Return on Total assets net profits/total assets 0.07 0.15
Solvency Ratios
Capital structure
ratio 2015 2015
Debt- equity debt/equity 2.01 2.61
Activity ratio
Efficiency ratio 2015 2015
Inventory turnover ratio Total Revenue/ average inventory 2.08 6.09
Assets turnover ratio Total revenue/Average assets 2.75 4.16