Contemporary Auditing
11th Edition
ISBN: 9781337650380
Author: KNAPP
Publisher: Cengage
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Assume that a corporate officer or other executive asks you, as the accountant for the company, to omit or leave out certain financial figures from the balance sheet that may paint the business in a bad light to the public and investors. Because the request does not involve a direct manipulation of numbers or records, would you agree to go along with the request? What ethical considerations exist for you in deciding on a course of action?
Accounting and ethics both played large roles in the last fiscal crisis and in many smaller scandals. How can knowledge of accounting help you guard against ethical lapses?
You are asked to be interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, “As I understand it, asset misappropriations are more likely to be found are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations.” How would you respond to the reporter’s observations?
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- Investigations into the corporate scandals of the recent past revealed that the accountant did not question the ethical validity of the accounting transactions and practices that led to the accounting frauds and resulted in enormous loss to the public and damaged the image of accounting profession. Do you agree?. Give a detail account of how accountants facilitated some of the famous corporate scandals like the Enron.arrow_forwardhow have the last decade of scandals affected the accounting profession? What about the public's perception of the profession?arrow_forwardYou are asked to be interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, “As I understand it, asset misappropriations are more likely to be found are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations.” How would you respond to the reporter’s observation?arrow_forward
- How does an accounting professional's commitment to the firm, the profession, and to colleagues influence whether he/she will blow the whistle on financial wrongdoing? What other factors, related to organizational culture, could contribute to whether or not a professional decides to blow the whistle on a financial wrongdoing?arrow_forwardHomer Winslow and Jane Alexander are discussing various aspects of the FASB’s concepts statement on the objective of financial reporting. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. He believes that the statement provides such broad guidelines that it would be impossible to apply the objective to present-day reporting problems. Jane concedes this point but indicates that the objective is still needed to provide a starting point for the FASB in helping to improve financial reporting. Instructions a. Indicate the basic objective established in the conceptual framework. b. What do you think is the meaning of Jane’s statement that the FASB needs a starting point to resolve accounting controversies?arrow_forwardEthical, Fraud, and Legal Issues for Accountants 1. What factors in the WorldCom case support the conclusion that CEO Bernie Ebbers knew about the financial statement fraud? What factors support his defense that he did not know about the fraud?arrow_forward
- As the engagement partner, you have reviewed the audit working papers of Royal Height Limited. The audit team has highlighted the following matters in the working papers: 1. Thirty percent of the company's recorded turnover (revenue) comprises of cash sales. Proper records of cash sales have not been maintained. Consequently, the audit team was unable to design audit procedures to verify the cash sales. 2. During the current year, the company changed the method of charging depreciation on its fixed assets from the straight line to the diminishing balance method. However, all the required disclosures have been included in the notes to the financial statements. Required: Discuss the impact of each of the above matters on your audit report Identify the basic types of audit reports other than a standard unqualified audit report and explain the circumstances under which each type of report is appropriate.arrow_forwardRegarding Enron, this was a company that resulted in the creation of the Sarbanes-Oxley Act and many reforms to the accounting profession. Research the company and answer the following questions. Question 1: How did the members of the accounting firms violate the standards of integrity and credibility? Question 2: Do you believe the new standards that resulted from the Enron scandal to be adequate? Question 3: Name and explain two aspects of the Sarbanes - Oxley Act of 2002.arrow_forwardAssume that you are interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, "As I understand it, asset misappropriations are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations." How would you respond to the reporter's observation?arrow_forward
- Hannah Montana is interviewing with public accounting firms to become an auditor. Hannah does not believe that fraud is a "big deal" in client organizations and argues that most individuals in management of companies are "honest people". She believes that auditors are becoming too cynical. Describe your response to Hannah's attitude and discuss the major types of fraud that occur in companies.arrow_forwardDo you think there are any circumstances when you should go outside the company to report financial wrongdoing? If so, to what person/organization would you go? Why? If not, why would you not take the information outside the company?arrow_forwardMr. Bader is leaving his Auditing Firm to become the Finance Director of his client company. The ethical dilemma that he is most likely to face would be conflict in: a. Confidentiality b. Due Care c. Professional Competence d. Professional Behaviorarrow_forward
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