Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 4, Problem 23P
Fraud triangle
Sam Sharp is an accountant with a shady past. Suffice it to say that he owes some very unsavory characters a lot of money. Despite his past, Sam works hard at keeping up a strong professional image. He is a manager at Flowers and Associates, a fast-growing CPA firm. Sam is highly regarded around the office because he is a strong producer of client revenue. Indeed, on several occasions he exceeded his authority in establishing prices with clients. This is typically a partner’s job but who could criticize Sam, who is most certainly bringing in the business. Indeed, Sam is so good that he is able to pull off the following scheme. He bills clients at inflated rates and then reports the ordinary rate to his accounting firm. Say, for example, the normal charge for a job is $2,500. Sam will smooth talk the client, then charge him $3,000. He reports the normal charge of $2,500 to his firm and keeps the extra $500 for himself. He knows it isn’t exactly right. Even so, his firm gets its regular charges and the client willingly pays for the services rendered. He thinks to himself, as he pockets his ill-gotten gains, who is getting hurt anyway?
Required The text discusses three common features (conditions) that motivate ethical misconduct. Identify and explain each of the three features as they appear in the given scenario.
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Consider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any?
A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last year, she won employee of the year and is a valued employee. Through the grapevine, Susan's boss just learned that Susan's brother has a gambling problem.
B. Now suppose that Susan from situation A is now secretary for the head of the marketing department. She keeps track of the vice president of marketing's schedule and handles the correspondence.
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Gladys is in charge of receiving all customer payments, recording the payments, and depositing them at the bank. What element of the fraud triangle is best described here?
Group of answer choices
Opportunity
Rationalization
Incentive/Pressure
Attribution
Gladys has large amounts of student loan debt and a crippling gambling habit. She works part-time job in another city. What element of the fraud triangle is best described here?
Group of answer choices
Opportunity
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Pressure/incentive
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Identify the fraud triangle risk factor (Opportunity, Pressure, or Rationalization) in each situation.
1. The business has no cameras or security devices at its warehouse.
2. A worker sees other employees regularly take inventory for personal use.
3. Payroll manager feels she is greatly underpaid.
4. No one matches the cash in the register to receipts when shifts end.
5. Managers are expected to grow business or be fired.
6. Managers are told to make extreme cuts in expenses.
Opportunity
Rationalization
Pressure
Opportunity
Pressure
Pressure
Chapter 4 Solutions
Survey Of Accounting
Ch. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - Prob. 3QCh. 4 - Prob. 4QCh. 4 - Prob. 5QCh. 4 - Prob. 6QCh. 4 - What is meant by separation of duties? Give an...Ch. 4 - 9. What are the attributes of a high-quality...Ch. 4 - 10. What is a fidelity bond? Explain its purpose.Ch. 4 - Prob. 10Q
Ch. 4 - Prob. 11QCh. 4 - Prob. 12QCh. 4 - Prob. 13QCh. 4 - Prob. 14QCh. 4 - Prob. 15QCh. 4 - Prob. 16QCh. 4 - Prob. 17QCh. 4 - Prob. 18QCh. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 21QCh. 4 - Prob. 22QCh. 4 - Prob. 23QCh. 4 - Prob. 24QCh. 4 - Prob. 25QCh. 4 - Prob. 26QCh. 4 - Prob. 27QCh. 4 - Prob. 28QCh. 4 - Prob. 29QCh. 4 - Prob. 30QCh. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Prob. 15ECh. 4 - Prob. 16ECh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - Fraud triangle Sam Sharp is an accountant with a...Ch. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 1ATCCh. 4 - Prob. 3ATCCh. 4 - Prob. 4ATCCh. 4 - ATC 6-7 Ethical Dilemma I need just a little extra...
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