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Koss Case

In: Business and Management

Submitted By solongotor
Words 9786
Pages 40
ISSUES IN ACCOUNTING EDUCATION
Vol. 26, No. 3
2011
pp. 547–568

American Accounting Association
DOI: 10.2308/iace-50004

Koss Corporation Case: Trouble in Brew City
Brian Daugherty and Daniel G. Neely
ABSTRACT: This instructional case provides auditing students an opportunity to examine an interesting real-life embezzlement and financial statement fraud occurring at a publicly traded company in the post-Sarbanes-Oxley (SOX) era. The case focuses on independent auditors’ and senior management’s reporting responsibilities related to internal control over financial reporting involving smaller public companies (nonaccelerated filers). While all public companies are subject to external auditor and management attestation on the effectiveness of internal control over financial reporting following SOX, the Securities and Exchange Commission (SEC) granted nonaccelerated filers numerous extensions for the effective date of required auditor attestation. In 2010, President Obama signed legislation to permanently exempt nonaccelerated filers from auditor attestation.
The case also highlights inherent risk assessments by the independent auditor when one individual holds multiple C-level titles (Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer, etc.) within the organization concurrent with membership on the board of directors, and requires students to recommend internal control policies and procedures designed to prevent or detect the embezzlement.
Keywords: embezzlement; fraud; internal control over financial reporting; SarbanesOxley; nonaccelerated filers.

INTRODUCTION

M

ilwaukee, Wisconsin-based Koss Corporation’s (Koss) founder, John C. Koss, has been recognized for creating the stereo headphone industry in 1958. Koss is a public company (ticker symbol ‘‘KOSS’’), subject to the Securities and Exchange
Commission’s (SEC)...

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