Comptronix, Inc. was a high‐technology company founded in 1984. It grew rapidly and by 1993 employed 1,700 people in three operating locations. The company went public in 1989, listing its stock with NASDAQ. The stock received consistent “buy” recommendations from brokerage firms until 1992, when its Board of Directors disclosed a fraud perpetrated by three of its officers. They had manipulated accounting records in order to overstate Comptronix's earnings for 1989–1991.
This case is intended for use in an auditing class. It describes a method of perpetrating the fraud allegedly used by the officers and includes financial data for the company and its competitors. Students are asked to identify audit procedures that would have detected the fraud and suggest conditions that should have alerted the auditor. Finally, students are asked to research a high‐technology company of their choice, looking for similar conditions.