Concept explainers
a.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state:The fraud committed by the company E, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
b.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company WC, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
c.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyP, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
d.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyHS, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
e.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company De, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
f.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company K, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
g.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company O, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
h.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company LFT, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
i.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company PFG, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
j.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company SFC, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
k.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyDF, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
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Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
- Explain the three special characteristics of management fraud: a. The fraud is perpetrated at levels of management above the one to which internal control structures generally relate. b. The fraud frequently involves using the financial statements to create an illusion that an entity is healthier and more prosperous than, in fact, it is. c. If the fraud involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions, often involving related third parties. Please provide me a correct and clear explanations. Thank you!arrow_forwardBelow are several statements about occupational fraud.1. For most large companies, occupational fraud is minimal and internal control procedures are unnecessary.2. Managers have a variety of reasons for manipulating the numbers in financial statements, such as maximizing their compensation, increasing the company’s stock price, and preserving their jobs.3. Internal control procedures include formal policies and procedures related to (1) safeguarding the company’s assets and (2) improving the accuracy and reliability of accounting information.4. “Cooking the books” is a phrase used by accountants to indicate the preparation of financial statements that are free of manipulation.5. Most occupational fraud cases involve misuse of the company’s resources.6. Common types of financial statement fraud include creating fictitious revenues from a fake customer, improperly valuing assets, hiding liabilities, and mismatching revenues and expenses.Required:State whether the answer to each of the…arrow_forwardDefine the following terms below: a. Financial crime b. Fraud triangle c. Money laundering d. Accounting Fraud e. Asset misappropriation f. Consumer fraud g. Data theft h. Tax fraud NB: Answer questions a-harrow_forward
- While spotting red flags is difficult, vertical and horizontal financial statement analysis introduces a straightforward approach to fraud detection. Evaluate Company A’s Five Year Financial Data, please see the attached. (a) Perform horizontal analysis of the above data to indicate any potential red flags regarding possible overstatement of sales. (b) Perform vertical analysis of the above data to indicate any potential red flags regarding possible overstatement of the COGS.arrow_forwardSummarize the alleged fraud List which management assertions were violated In your opinion, what component(s) of the COSO framework were weak/missing? If you were to audit FTX’s cash, name 1-2 procedure(s) that you could have done to detect this fraudFOR Defendant concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX), the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing. According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors. In his…arrow_forwardWhich of the following statements is correct? Select one: a. Account receivable turnover is equal to net credit sales divided by average net accounts receivable. b. Buying aged receivables from businesses and then collects the payments directly from the customers is called Allowance for uncollectible accounts. c. Auto generated document numbers is a fraud preventive method which is more efficient than physical controls. d. If the same people are responsible for a series of related accounting activities is called Segregation of Duties.arrow_forward
- 2. FRAUD SCHEME PURCHASING AGENT A purchasing agent for a large hardware retailer has sole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent's brother- in-law, which charges above-market prices for its products. The agent's relationship with the supplier is unknown to his employer. C ta th di Required What type of fraud is this, and what controls can be implemented to prevent or detect the fraud? Re a.arrow_forwardComputer Frauds and Missing Control Procedures. The following are brief stories ofactual employee thefts and embezzlements perpetrated in an IT environment.Required:What type of control procedure that might have prevented or detected the fraud was missingor inoperative?a. An accounts payable terminal operator at a subsidiary entity fabricated false invoicesfrom a fictitious vendor and entered them in the parent entity’s central accounts payable/cash disbursement system. Five checks totaling $155,000 were issued to the “vendor.”b. A bank provided custodial and record-keeping services for several mutual funds. Aproof-and-control department employee substituted his own name and account numberfor those of the actual purchasers of some shares. He used the accounting informationsystem to conceal and shift balances from his name and account to names and accountsof the actual investors when he needed to avoid detection because of missing amounts inthe investors’ accounts.c. The university’s…arrow_forwardResearch has shown that situational pressures and opportunity are factors that contribute to fraudulent behavior. a. Identify two situational pressures in a public company that would increase the likelihood of fraud. b. Identify three opportunity situations that would increase the likelihood of fraud.arrow_forward
- FRAUD-MOTIVATING FACTORSResearch has shown that situational pressures and opportunity are factors that contribute to fraudulent behavior. Requireda. Identify two situational pressures in a public company that would increase the likelihood of fraud.b. Identify three opportune moments that would increase the likelihood of fraud.arrow_forwardWhich of the following is NOT a trend in Corporate Fraud? a) Anti-fraud controls have little impact on reduced fraud losses and shorter fraud duration b) Tips are consistently the most common detection method c) Banking, financial services, government/public administration and manufacturing have the greatest number of fraud cases reportedarrow_forward
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