Dome Chemical versus Infringement, Inc.

© 1997

ISBN 0-538-88789-3

Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 10 pages in length and its case teaching package is 6 pages.

Abstract

This case, based on actual litigation, focuses on the use of analytical and review procedures in search of accounting irregularities in the context of a patent-infringement suit. The student is placed in the role of a certified public accountant engaged by the plaintiff's attorney, a patent­and­ trademark specialist. The student is asked to review financial reports and tax returns of the infringing company. In Part I, the student is asked to identify questionable areas or "red flags" in the financial and tax reports, to request additional records for further investigation, and to identify procedures to be applied. Additional information is provided in Part II, from which further conclusions or hypotheses may arise, including that inventory shaving and cash skimming may have occurred. Finally, evidence obtained in Part III reflects on or confirms some of the preceding hypotheses and asks for final testimony from the student.

Fit Within a Course/Linkages to Textbooks or Journal Articles

This case is most appropriate for a class in auditing or advanced auditing following coverage of analytical procedures.

Study Questions

1. Review Exhibits 1, 2, and 3 for any indication of accounting irregularities. Discuss what other accounting records of Infringement, Inc., you would want for your review and the purpose for obtaining such records. Describe also what procedures you would employ to assure yourself of Infringement's gross and net profits calculations. Indicate the objective of these procedures.
2. Review Exhibits 4, 5, 6, and 7 and describe your preliminary conclusions from the analysis. Also, describe your preliminary conclusions from the review of general ledger detail. Finally, describe what documents you would now request and what procedures you intend to employ.
3. Describe the testimony you are now prepared to offer.