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 12CYBK
To determine
Introduction:Committee of Sponsoring Organizations of the Tread way Commission (COSO) is an authorized provider for guiding companies on various matters like internal controls of management, threat management, and fraud anticipation.
To identify:The results drawn from the COSO studies.
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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!
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.
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
Chapter 2 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2CYBKCh. 2 - Prob. 3CYBKCh. 2 - Prob. 4CYBKCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 6CYBKCh. 2 - Prob. 7CYBKCh. 2 - Prob. 8CYBKCh. 2 - Prob. 9CYBKCh. 2 - Prob. 10CYBK
Ch. 2 - Prob. 11CYBKCh. 2 - Prob. 12CYBKCh. 2 - Prob. 13CYBKCh. 2 - Prob. 14CYBKCh. 2 - Prob. 15CYBKCh. 2 - Prob. 16CYBKCh. 2 - Prob. 17CYBKCh. 2 - Prob. 18CYBKCh. 2 - Prob. 19CYBKCh. 2 - Prob. 20CYBKCh. 2 - Prob. 21CYBKCh. 2 - Prob. 22CYBKCh. 2 - Prob. 23CYBKCh. 2 - Prob. 24CYBKCh. 2 - Prob. 1RQSCCh. 2 - Prob. 2RQSCCh. 2 - Prob. 3RQSCCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 5RQSCCh. 2 - Prob. 6RQSCCh. 2 - Prob. 7RQSCCh. 2 - Prob. 8RQSCCh. 2 - Prob. 9RQSCCh. 2 - Prob. 10RQSCCh. 2 - Prob. 11RQSCCh. 2 - Prob. 12RQSCCh. 2 - Prob. 13RQSCCh. 2 - Prob. 14RQSCCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 16RQSCCh. 2 - Prob. 17RQSCCh. 2 - Prob. 18RQSCCh. 2 - Prob. 19RQSCCh. 2 - Prob. 20RQSCCh. 2 - Prob. 21RQSCCh. 2 - Prob. 22RQSCCh. 2 - Prob. 23RQSCCh. 2 - Prob. 24RQSCCh. 2 - Prob. 25RQSCCh. 2 - Prob. 26FFCh. 2 - Prob. 27FFCh. 2 - Prob. 28FF
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- Which of the following is not included in a vulnerability chart? a. Internal controls that a company plans to institute in the future. b. Breakdowns in key internal controls that may have created fraud opportunities. c. Theft investigation methods d. Explanations of the fraud triangle in relation to suspects of fraud.arrow_forwardThe fraud triangle asserts that the following three factors must exist for a person to commit fraud.A. Opportunity B. Pressure C. RationalizationIdentify the fraud risk factor (A, B, or C) in each of the following situations. The business has no cameras or security devices at its warehouse.arrow_forwardFraud risk factors are events or conditions that indicateI. An incentive or pressure to perpetrate fraud.II. An opportunity to carry out the fraud.III. An attitude or rationalization that justifies the fraudulent action.Which of the following statements is true?a. I is a fraud risk factor.b. I and II are fraud risk factors.c. II and III are fraud risk factors.d. None of these is a fraud risk factor.e. I, II, and III are fraud risk factors.arrow_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_forwardResearch 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_forwardComputer Frauds and Missing Control Procedures. The following are brief stories ofactual employee thefts and embezzlements perpetrated in an IT environment.Required:What type of control procedure that might have prevented or detected the fraud was missingor inoperative?a. An accounts payable terminal operator at a subsidiary entity fabricated false invoicesfrom a fictitious vendor and entered them in the parent entity’s central accounts payable/cash disbursement system. Five checks totaling $155,000 were issued to the “vendor.”b. A bank provided custodial and record-keeping services for several mutual funds. Aproof-and-control department employee substituted his own name and account numberfor those of the actual purchasers of some shares. He used the accounting informationsystem to conceal and shift balances from his name and account to names and accountsof the actual investors when he needed to avoid detection because of missing amounts inthe investors’ accounts.c. The university’s…arrow_forward
- What is a good response to.... Embezzlement is a type of fraud that happens when someone within an organization misuses their position of trust to steal money. This breach of trust is an intentional form of deceit to misappropriately utilize these funds for their own gain. Reviewing sales, refunds, returns, cash deposits, and voided transactions would help identify any form of fraud as an assistant manager. If there are any discrepancies identified, it would help to review logs of who accessed software at specific times to help identify the culprit. If there was something identified the next step would be to reports the findings to higher management depending on company protocol and be a confidant during the investigation process. It is not advisable to have direct confrontation as it could lead to further deceitful actions with the intent to cover up their actions.arrow_forwardWhich of the following is designed specifically to detect fraud? 1. A surprise visit to the client's warehouse. 2. Looking at little-used or miscellaneous accounts. 3. Testing internal controls for operating deficiencies. 4.1 and 2 only. 5.1 and 3 only. O 1 O 2 0 3 0 4 0 5arrow_forwardWhen assessing the danger of substantial falsification of the financial accounts, what is the ethical value of utilizing the Fraud Triangle?arrow_forward
- Many consider the Enron fraud to be one of the most significant frauds of the early 2000s. a. Describe the various failures and environmental characteristics during this rime that enabled the Enron fraud to happen. b. What elements of the fraud triangle seem most relevant to the Enron fraud?arrow_forwardOne of the typical characteristics of management fraud isa. Falsification of documents in order to misappropriate funds from an employer.b. Victimization of investors through the use of materially misleading financialstatements.c. Illegal acts committed by management to evade laws and regulations.d. Conversion of stolen inventory to cash deposited in a falsified bank account.arrow_forwardThe fraud triangle asserts that the following three factors must exist for a person to commit fraud.A. Opportunity B. Pressure C. RationalizationIdentify the fraud risk factor (A, B, or C) in each of the following situations. Officers are told to show rising income or risk layoffs.arrow_forward
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