e. Of the following, the most significant risk factor relating to the risk of misstatement arising from fraudulent financial reporting for SSC is that Multiple Choice Company officers serve on the board of directors. The company must refinance a significant portion of its debt.

e. Of the following, the most significant risk factor relating to the risk of misstatement arising from fraudulent financial reporting for SSC is that Multiple Choice Company officers serve on the board of directors. The company must refinance a significant portion of its debt.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A current issue before the Financial Accounting Standards Board (FASB) is whether accounting standards should be moving from rule-based standards to principle-based standards. Rule-based standards provide specific measurements guidelines that are currently used to classify investment securities (for example, less than 20%, from 20% to 50%, and over 50%). Principle-based standards rely on general principles such as significant influence or control of a company, without any more detailed guidelines. You are the chief financial officer for a large corporation, and FASB just issued a request for comment on a proposed change from the current standard to a principle-based standard. Choose the standard that best meets the business need and justify your choice. Evaluate and defend whether your choice would change if you were an investor in the company.
observers of the accounting profession suggest that many courts attempt to "socialize" investment losses by extending auditors liability to third party financial statement users. discuss the benefits and costs of such a policy to public accounting firms, audit clients, and third party financial statement users such as investors and creditors. in your view should the courts have the authority to socialize investment losses
Indicate whether the information indicates an increased risk for fraud. If the information indicates an increased risk of fraud, indicate which fraud condition (incentives/pressures, opportunities, or attitudes/rationalization) is indicated. During audit planning, an auditor obtained the following information: Management has a strong interest in employing inappropriate means to minimize reported earnings for tax-motivated reasons. The company’s board of directors includes a majority of directors who are independent of management. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate. The company is marginally able to meet exchange listing and debt covenant requirements. New accounting pronouncements have resulted in explanatory paragraphs for consistency for the company and other firms in the industry.
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The notes to financial statements should not be used to [A] present disclosures required by generally acceptedaccounting principles B] describe the accounting policies adopted by an enterprise [C] correct an improper financialstatement presentation [D] describe the basis for resolving uncertainties in the financial statements [E] none of thechoices
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Which of the following characteristics is most likely to heighten an auditor’s concernabout the risk of material misstatements due to fraud in an entity’s financial statements?(1) The entity’s industry is experiencing declining customer demand.(2) Employees who handle cash receipts are not bonded.(3) Internal auditors have direct access to the board of directors and the entity’smanagement.(4) The board of directors is active in overseeing the entity’s financial reporting policies.
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