Flight Transportation Corporation.

Topics: Auditing, Audit, Financial audit Pages: 4 (1175 words) Published: September 29, 2011
Summary of Case….
We are a society that depends on the integrity and honesty of individuals and organizations to ensure that we optimize our living situation, but unfortunately some members of our society do not always act with integrity, and are not always honest, and therefore we need checks and balances to ensure that such corruption and/or errors do not significantly disrupt the living situation amongst the majority of people. The case that I will be discussing in my project is based on Flight Transportation Corporation. Flight Transportation Corporation (FTC), an aviation company based in Eden Prairie, Minnesota. FTC’s principal line of business was executive and group air charters. In 1980 and 1981, the rapidly growing company reported revenues of $8 million and $24.8 million, respectively. FTC’s dramatic growth caught the attention of investors nationwide. These investors were particularly impressed by FTC’s strong operating results in the face of a recession that was gripping the country. Unfortunately for these investors, most of FTC’s revenues existed only in the minds of the company’s executives. Similarly, several million dollars of assets reported in the company’s 1980 and 1981 balance sheets were purely imaginary. From 1979 through 1982, FTC executives used the company’s bogus financial statements to raise more than $32 million of capital in three securities offerings to the public. The executives diverted several million dollars of these funds for their personal use. In July 1980, shortly after the beginning of FTC’s 1981 fiscal year, the company established a subsidiary in the Cayman Islands. The reported purpose of this subsidiary was to operate an air charter business. During fiscal 1981, FTC recorded $13 million of nonexistent revenues through FTC Cayman Ltd., its Cayman Islands Subsidiary. These revenues accounted for more than one-half of FTC’s consolidated revenues for fiscal 1981.FTC’s balance sheet reported more than $6 million of...
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