Chapter 1, Problem 5E

To determine

Concept Introduction:

1. Ethics:

   The ethics can be defined as the beliefs of a person that helps him to distinguish between right decisions and wrong decisions or right paths or wrong paths.

2. Fraud triangle:

   A fraud triangle can be defined as framework designed to explain the reasoning behind a person's decision to commit fraud at workplace. The stages of reasons for fraud can be − prevention, opportunity and rationalisation.

3. Prevention:

   It is way to arrange things or manage things that will give the least scope to any fraud.

4. Internal controls:

   Internal controls are the processes that make sure that things are done in such a way that would ensure the integrity of financial and accounting fraud and they will also help in preventing frauds.

5. Sarbanes-Oxley Act:

   This act focus on proper documentation and verification of well-planned internal controls set-up in the organization

6. Audit:

   Audit ensures that financial statements and prepared in accordance with GAAP or not.

7. Dodd-Frank Act:

   According to this act, SEC pays 10 % to 30 % of sanctions exceeding $ 1 million.

To match:

The given phrases or terms to with the given descriptions −

Given phrases −

1. Ethics:
2. Fraud triangle
3. Prevention
4. Internal controls
5. Sarbanes-Oxley Act
6. Audit
7. Dodd-Frank Act

Given description −

1. Requires the SEC to pay whistle-blowers
2. Examines whether financial statements are prepared using GAAP, it does not ensure absolute accuracy of the statement.
3. Requires documentation and verification of internal controls and increases emphasis on internal control effectiveness.
4. Procedures step to protect company property and equipment, ensure reliable accounting, promote efficiency, and encourage adherence to policies.
5. A less expensive and more effective means to stop fraud
6. Three factors push a person to commit fraud: opportunity, pressure; and rationalization
7. Beliefs that distinguish right from wrong