Show:
The Interworkings
Main Characters
Happiness Express did What?
Audit Failures
Key Terms
100
What percentage of receivables were factored in 1995?
19%
100
Which two people founded Happiness Express, Inc.?
Joseph and Isaac Sutton
100
Happiness Express’s reported net income for fiscal 1995 was $7.5 million. What was the actual net income (loss) for the year?
$1 Million loss
100
The auditors failed to recognize the significant change in what business practice?
The percentage of factored receivables
100
The illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information.
Insider Trading
200
The Power Rangers toys accounted for what percentage of total sales in 1995?
75%
200
What toy was created by Sarah Ferguson, the Duchess of York?
Budgie the Little Helicopter
200
Happiness Express booked huge fraudulent sales at the end of fiscal 1995 for which two companies?
1. Wow Wee 2. West Coast Liquidators
200
What was the main error Coopers & Lyrbrand made when confirming the Wow Wee receivable?
Allowing management to contact the company of behalf of the auditors
200
A legal term that refers to intent or knowledge of wrongdoing, where an offending party has knowledge of the "wrongness" of an act or event prior to committing.
Scienter
300
Happiness Express attributed its early success to what?
Market Research
300
Which two (toy) characters allowed Happiness Express to establish itself in the toy industry?
1. The Little Mermaid 2. Barney, the Purple Dinosaur
300
What was the primary source of the Company’s financial problems which prompted the fraud?
The sudden drop in sales of Mighty Morphin Power Rangers
300
Which company did the auditors overlook when auditing receivables, despite the fact that it accounted for almost 13% of Happiness Express’s total sales on account
Wow Wee
300
The sale of a security that isn't owned by the seller, but that is promised to be delivered.
Short Selling
400
What is one of the three aspects of Happiness Express’s business model?
i. Identifying popular characters introduced to American children by movies, television, books and other publications ii. Purchasing licensing and merchandise rights for those characters iii. Marketing the merchandise to major retailers
400
Who was charged with insider trading of Happiness Express stock? (Must include all 3 people)
1. Michael Goldberg (CFO) 2. Mitchell Goldberg (landlord) 3. Steven Weissman (friend)
400
The class action lawsuit filed against Happiness Express the day after the September 1995 announcement charged Happiness Express and its key officers with ________ & _________?
Fraudulent misrepresentations and insider trading
400
What did Cooper’s & Lybrand outline as an indicator of the risk of potential material misstatements in the financial statements? (According to the text)
Unusually large increases in year-end sales to a single or a few customers
400
A business arrangement in which one company gives another company permission to manufacture its product for a specified payment
Licensing Rights