Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 39EOQ
To determine
Identify the appropriate answer related to the condition which could affect the misstatement due to fraud activities.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The filing of a 10-K and an annual report are required by the Securities and Exchange Commission. Failure to do so can result in civil penalties levied against the corporation.
True
False
A negative cash flow from operations, a positive cash flow from investing and a positive cash flow from financing can indicate the a company is in financial trouble.
True
False
Kim Company, a CPA firm, conducted
an audit for the 2020 financial
statements of Erin Corporation. The
auditors found that the accounting
manager changed the journal entry
for estimating bad debt expense to a
smaller number to hide the poor
results from extending credit to high
risk customers. This made income
materially higher than it otherwise
would have been. This is an example
of:
Embezzlement
Employee fraud
Larceny
Management fraud
O None of the above
ABC Corporation (the "Company") incurred heavy losses over the past 10 years resulting in deficit and liquidity problems. The Company considers borrowing from different banks as a way to produce more funds for the company to continue operation and possibly, recover from losses. However, banks are afraid to grant loans to the Company due to recent issues with fraudulent issuance of financial statements by the companies just to obtain loans.In line with the above scenario, what good corporate governance practices may be implemented by the company to increase the confidence of banks (lenders) and avoid the high probability of issuing misstated financial statements by the company?
- Have an independent external audit
- Require internal audit to conduct examination/audit of Company’s FS
- Have the financial statements certified by BIR, Management, and SEC before submission to Banks
- Increase integrity and loyalty of BOD
Chapter 10 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prepare an example of lapping of cash receipts,...Ch. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Explain two procedures by which auditors may...Ch. 10 - Prob. 18RQCh. 10 - Prob. 19RQCh. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Prob. 22RQCh. 10 - Prob. 23RQCh. 10 - Prob. 24RQCh. 10 - Prob. 25RQCh. 10 - Prob. 26QRACh. 10 - Henry Mills is responsible for preparing checks,...Ch. 10 - During the first few months of the year, John...Ch. 10 - Prob. 29QRACh. 10 - Prob. 30QRACh. 10 - Prob. 31QRACh. 10 - Prob. 32QRACh. 10 - Prob. 33QRACh. 10 - Prob. 34QRACh. 10 - Prob. 35QRACh. 10 - Prob. 36QRACh. 10 - Prob. 37QRACh. 10 - Select the best answer for each of the following...Ch. 10 - Prob. 38BOQCh. 10 - Prob. 38COQCh. 10 - Prob. 38DOQCh. 10 - Prob. 38EOQCh. 10 - Prob. 38FOQCh. 10 - Reconciliation of the bank account should not be...Ch. 10 - The auditors suspect that a clients cashier is...Ch. 10 - Prob. 38IOQCh. 10 - Prob. 38JOQCh. 10 - Prob. 38KOQCh. 10 - Prob. 38LOQCh. 10 - Which of the following represents a correct...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Prob. 39DOQCh. 10 - Prob. 39EOQCh. 10 - Prob. 39FOQCh. 10 - Prob. 40OQCh. 10 - Prob. 41OQCh. 10 - Prob. 42OQCh. 10 - Prob. 43OQCh. 10 - Prob. 44OQCh. 10 - Prob. 45OQCh. 10 - Prob. 46PCh. 10 - Prob. 47PCh. 10 - Prob. 48PCh. 10 - Prob. 49PCh. 10 - Prob. 50ITCCh. 10 - Prob. 51ITCCh. 10 - Prob. 52RDCCh. 10 - Prob. 53EC
Knowledge Booster
Similar questions
- ABC Company filed a bankruptcy this month because of the impact of fraudulent act committed by its financial officer. The financial officer transfers the companies fund to his personal account. Which statement is related in this scenario? O a. Employee safety issues O b. Use of Corporate resources O c. Personal issues d. Conflicts of interestarrow_forwardAn analyst assessed a company and determined the company reported a "high quality of earnings." This implies that management issued a press release indicating it was not aware of any fraud during the current year. the company’s management exercised little or no discretionary influence in reporting financial statement information to shareholders. management has used its influence in determining the dollar amounts reported on financial statements. income statement items reported during the current period can be expected to reflect future income levels.arrow_forwardThe following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. In the fourth quarter of FY 1999, Rite Aid prematurely recognized $17 million relating to a litigation settlement with a vendor. Rite Aid should not have recognized this sum in that period because the settlement offer was expressly contingent upon the execution of a formal settlement agreement which did not take place until May 20, 1999. Moreover, the litigation settlement was also contingent upon the execution of a purchasing agreement that was not finalized until May 18, 1999. Both of these contingencies were expressly stated in the February 26, 1999 letter of intent signed by Grass.arrow_forward
- In an article published in The Australian on 4 May 2021, it was noted that the company named as the ‘ABCGroup’ reported a big loss equal to $595 million and negative net assets of $75 million. The company seemsinsolvent and unable to pay all of its liabilities if they fall due. The auditors did not qualify the financialstatements, nor challenge the directors on their assertion that the company was a going concern.Requirement:1) Discuss the implications for the company’s financial statements preparation and presentation if thecompany is not considered to be a going concern? Use the conceptual framework concept andgeneral-purpose financial statements requirement given the evidence provided above?arrow_forwardFictitious accounting entries are recorded that cause revenue to be overstated by $5 millionfor the year; the accounting manager was trying to make the company’s income look betteron the company’s upcoming loan application. This type of fraud is:a. asset misappropriation.b. fraudulent financial reporting.c. GAAP disordering.d. IFRS misalignment.arrow_forwardThe auditor has determined that there is a material going concern uncertainty at the company due to their inability to comply with the requirements to refinance the company's debt. In addition, the company is suffering from losses and negative cash flows due to poor economic circumstances. The bank has refused to renew the company's borrowings and the directors now have no other option but to cease to trade. Inquiries of management have not revealed any practical plans or tangible solution to deal with the problem. Suppose that the financial statements have been prepared using the going concern basis of accounting but, in the auditor's judgment, management's use of the going concern basis of accounting in the preparation of the financial statements is inappropriate, what should be the opinion of the auditor in their report? a. Disclaimer Opinion O b. Adverse Opinion O c. Unqualified Opinion O d. Qualified Opinionarrow_forward
- The Ministry of Magic, the regulator of businesses, is concerned about the public financial reporting that was produced by Eeylops Owl Emporium Ltd. The Ministry was aware that the emporium had not indicated that it was discontinuing a division of its business and that for the last financial year it had not included an acquisition of a new building in its balance sheet, which it had purchased some three months before the end of the financial year. Explain why the regulator is concerned with such oversights and what the emporium is required to do in each case.arrow_forwardIdentify one (1) real-life ‘financial reporting accounting fraud’ that occurred post 1990 (i.e. in the last 30 years), in any country, and answer the following questions: a) Discuss what specific accounting regulations were violated?arrow_forwardManagement informed the auditor that they erroneously charged the acquisition of SMC shares to the account “Marketable Securities” when they never had any intention to dispose of this when in need of cash. These shares should be treated as securities @ FVOCI – noncurrent. The company recorded a 20,000 decline in market value of these shares and charged this to operating expenses. Requirement: Prepare adjusting entriesarrow_forward
- The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. Rite Aid failed to record an accrued expense for stock appreciation rights it had granted to employees, in a program that gave the recipients the right to receive cash or stock in amounts tied to increases in the market price of Rite Aid stock. Rite Aid should have accrued an expense of $22 million in FY 1998 and $33 million in FY 1999 for these obligations.arrow_forwardA company Hira Ltd. has been mis-reporting its financial statements since more than 10 years which none of the stakeholders noticed for years. When the situation of the Company went from bad to worse and it had no option but to declare it bankrupt, the company issued a press statement that there is disparity between actual and reported results due to accounting errors. The first question from shareholders of the Company was why the auditors had not spotted and corrected the fundamental accounting errors? The auditor of the Company, WCP partnership (one of the largest audit firm in the country), had compromised its independence by a large audit fee and also consultancy income worth several times the audit fee. Because Hira Ltd. was such an important client for WCP, it had knowingly signed off inaccurate accounts in order to protect the management of the Company. The investigation also found a number of significant internal control deficiencies including no effective management oversight…arrow_forwardaccountant reviews the report from the internal audit function that ensures the company's internal controls and risk management policies are functioning properly. According to report, there were discrepancies in the internal controls that are not in conformance with the organizational policy and applicable law. The accountant suspects that the CEO is pezzling approximately $30,000 per quarter. What should the accountant do about this discrepancy? te accountant fails to act on this issue, what standard according to the IMA Statement of Ethical Professifal Practice does the accountant violate? the toolbar, press ALT + F10 (PC) or ALT + FN + F10 (Mac).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning