7-38 Nefret Stores is a large discount cosmetic department store chain.
The company has recently expanded from 5 to 15 stores by borrowing from several large financial institutions and from a public offering of common stock.
A recent investigation has disclosed that Nefret materially overstated net income.
The company understated their accounts payable and recorded fictitious supplier credits that further reduced accounts payable .
As a result, an Income& Sales Tax Department investigation was critical of the evidence gathered by Nefret's audit firm,Abdul & El-Emir , in testing accounts payable and the supplier credits.