Answered: A corporation has discovered that an…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance

Section: Chapter Questions

Problem 3RQSC

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Controversy tends to surround the topic of whistleblowers. For example, should they be considered heroes or traitors? Many pro-whistleblowing policies have been enacted by the federal government to allow these individuals to reap significant monetary rewards for coming forward and giving information about behaviors and actions such as corporate fraud and unethical deeds. Many corporate whistleblowers face negative consequences of their actions, such as reassignment, revenge, and hate crimes, and are seen as traitors (e.g., Edward Snowden and Gina Gray). Yet Sherron Watkins and Cynthia Cooper were celebrated as heroes. Look up the stories of Sherron Watkins and Cynthia Cooper. Why do you think that some whistleblowers are vilified and others made to be heroes?
Read the following scenario about Strang Corporation and identify the substantive procedures that the CPA (Elaine Stanley) should perform to determine whether lapping exists. Do not discuss deficiencies in the system of internal control. During the year, Strang Corporation began to encounter cash flow difficulties, and a cursory review by management revealed receivable collection problems. Strang’s management engaged Elaine Stan ley, CPA, to perform a special investigation. Stanley studied the billing and collection cycle and noted the following: The accounting department employs one bookkeeper who receives and opens all incoming mail. This bookkeeper is also responsible for depositing receipts, filing daily remittance advices, recording receipts in the cash receipts journal, and posting receipts in the individual customer accounts and the general ledger accounts. There are no cash sales. The bookkeeper prepares and controls the mailing of monthly statements to customers. The concentration of functions and the receivable collection problems caused Stanley to suspect that a systematic theft of customers’ payments through a delayed posting of remittances (lapping of accounts receivable) is present.
Indicate whether each of the following statements is true or false. Bribery in the world of business typically happens when an organization or representative of an organization gives financial benefits to an official to gain favor or manipulate a business decision. The Foreign Corrupt Practices Act was implemented in the aftermath of disclosures that businesses were violating the IMA Code of Ethics. Managers are required to follow specific rules issued by the iMA for internal financial reporting. Ethics is more than obeying laws. The Sarbanes-Oxley Act addressed public company accounting reform.

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