Auditing and Assurance Services, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134075754
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 14, Problem 28DQP
a.
To determine
Identify the fraud companies that were included on the report and also state the percentage of fraud that were involved in improper revenue recognition.
b.
To determine
Identify the two types of categories of improper revenue recognition and also state the difference between them.
c.
To determine
Provide the techniques that are used for overstating revenue and also explain the term conditional sale and bill and hold sale.
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Students have asked these similar questions
Chapter 3 of the textbook discusses many methods individuals can use to communicate financial statement information to stakeholders in a fraudulent manner.
Choose one method and explain how perpetrators use it.
Which of the three “M’s of financial reporting fraud does this method fall under?
Cite a case related to the method.
Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?
The following scenarios are taken from actual fraud cases. For each scenario, categorize as primarily indicating (A) An incentive to commit fraud (B) An opportunity to commit fraud or (C) a rationalization for committing fraud. State your reason for your answer in each scenario.
1. Top management of the company closely guards internal financial information, to the extent that even some employees on a "need to know basis" are denied full access.
Chapter 14 Solutions
Auditing and Assurance Services, Student Value Edition (16th Edition)
Ch. 14 - Describe the following documents and records and...Ch. 14 - Prob. 2RQCh. 14 - Prob. 3RQCh. 14 - Prob. 4RQCh. 14 - Prob. 5RQCh. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - Prob. 8RQCh. 14 - Prob. 9RQCh. 14 - Prob. 10RQ
Ch. 14 - Prob. 11RQCh. 14 - Prob. 12RQCh. 14 - Prob. 13RQCh. 14 - Prob. 14RQCh. 14 - Prob. 15RQCh. 14 - Prob. 16RQCh. 14 - Prob. 17RQCh. 14 - Prob. 18RQCh. 14 - Prob. 19.3MCQCh. 14 - Prob. 19.1MCQCh. 14 - Prob. 19.2MCQCh. 14 - Prob. 20.1MCQCh. 14 - Prob. 20.2MCQCh. 14 - Prob. 20.3MCQCh. 14 - An auditor is performing substantive tests of...Ch. 14 - Prob. 21.2MCQCh. 14 - Prob. 22.1MCQCh. 14 - Prob. 22.2MCQCh. 14 - Prob. 22.3MCQCh. 14 - Prob. 23DQPCh. 14 - Prob. 24DQPCh. 14 - Prob. 25DQPCh. 14 - Prob. 26DQPCh. 14 - Prob. 27DQPCh. 14 - Prob. 28DQPCh. 14 - Prob. 29DQPCh. 14 - Prob. 30DQPCh. 14 - Prob. 31DQPCh. 14 - Prob. 32DQPCh. 14 - Prob. 33DQPCh. 14 - Prob. 34CCh. 14 - Prob. 35ICA
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- Assume that you are interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, "As I understand it, asset misappropriations are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations." How would you respond to the reporter's observation?arrow_forwardWhich of the following actions did the Treadway Commission recommend to reduce fraudulent financial reporting? Establish financial incentives that promote integrity in the financial reporting process. Identify and understand the factors that lead to fraudulent financial reporting. Assess the risk of corruption and misappropriation of assets within the company. Design and implement internal controls to provide reasonable assurance of preventing fraudulent financial reporting.arrow_forwardThe following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. Rite Aid failed to record an accrued expense for stock appreciation rights it had granted to employees, in a program that gave the recipients the right to receive cash or stock in amounts tied to increases in the market price of Rite Aid stock. Rite Aid should have accrued an expense of $22 million in FY 1998 and $33 million in FY 1999 for these obligations.arrow_forward
- (Section 401) How does this section relate to the Enron fraud? (Section 404) How do the management assessment and auditor attestation of internal controls contained in this section help to address the risk of fraud in publicly traded organizations?arrow_forwardHow can accounting information systems aid in the prevention of fraud? Do legislative activities such as the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act of 2002 really aid in the prevention of accounting fraud? Justify your answer.arrow_forwardWhich of the following is not a Sarbanes-Oxley Actrequirement intended to reduce fraud opportunities?a. Increase fines and jail sentences for fraud perpetrators.b. All public companies establish an audit committee ofindependent directors.c. Management of all public companies evaluates andreports on the effectiveness of internal control overfinancial reporting.d. External auditors of large public companies evaluateand report on the effectiveness of internal control overfinancial reporting.arrow_forward
- Research a company that had a fraud event happen due to inadequate accounting procedures. Review the fraud event that happened in the company in detail and identify at least two accounting control procedures that were deficient in this event. Propose an internal control system that would have eliminated the fraud, using the ERP system.arrow_forward1. Access the International Federation of Accountants Web site (www.ifac.org) and briefly describe the following two International Auditing Standards: ISA 500 and ISA 505. 2. Access the U.S department of justice website, and briefly explain the characteristics of identity theft. Give two examples of ways to commit identity theft. 3. Locate SEC Accounting and Auditing Enforecement Release No. 3029. What did that SEC release discuss?arrow_forwardThe Peregrine financial group fraud Background on the company and type of fraud committed How the detection of the fraud was revealed Two methods of investigation that differs from the actual fraud casearrow_forward
- Accounts payable fraud is an issue that may arise. Find an Accounts payable fraud story on the internet Discuss the following: What was the purpose of the fraud? What were the actions and consequences? Who benefitted from the fraud? How did the fraud get discovered? What controls should have been in place to prevent fraud?arrow_forwardDiscuss the motives of why C-Suite executives would commit fraud and how understanding the motive for fraud can assist an auditor in the analysis of financial statement.arrow_forwardIdentify one (1) real-life ‘financial reporting accounting fraud’ that occurred post 1990 (i.e. in the last 30 years), in any country, and answer the following questions: a) Discuss what specific accounting regulations were violated?arrow_forward
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