Auditing: A Risk Based-Approach (MindTap Course List)
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Chapter 2, Problem 11RQSC
To determine

Introduction: Misappropriation of assets refers to stealing or using company’s assets for personal purposes; whereas, fraudulent financial reporting refers to manipulating financial statements to represent a better picture of the financial position of the company.

To categorize: The frauds of companies into asset misappropriation or fraudulent financial reporting.

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The 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 case
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.
Explain the three special characteristics of management fraud: a. The fraud is perpetrated at levels of management above the one to which internal control structures generally relate. b. The fraud frequently involves using the financial statements to create an illusion that an entity is healthier and more prosperous than, in fact, it is. c. If the fraud involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions, often involving related third parties.   Please provide me a correct and clear explanations. Thank you!
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