Concept explainers
a.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state:The fraud committed by the company E, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
b.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company WC, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
c.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyP, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
d.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyHS, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
e.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company De, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
f.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company K, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
g.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company O, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
h.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company LFT, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
i.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company PFG, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
j.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the company SFC, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
k.
Introduction: Recording the fraudulent financial statements means intentionally misrepresenting the financial statements to mislead the investors about the profitability and financial performance of a company.
Asset misappropriation includes frauds in which an employee tries to steal from an organization by carrying out fraudulent practices.
To state: The fraud committed by the companyDF, categorizing primarily on the basis of asset misappropriation or fraudulent financial practice.
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Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
- Define the following terms below: a. Financial crime b. Fraud triangle c. Money laundering d. Accounting Fraud e. Asset misappropriation f. Consumer fraud g. Data theft h. Tax fraud NB: Answer questions a-harrow_forwardWhich of the following statements is correct? Select one: a. Account receivable turnover is equal to net credit sales divided by average net accounts receivable. b. Buying aged receivables from businesses and then collects the payments directly from the customers is called Allowance for uncollectible accounts. c. Auto generated document numbers is a fraud preventive method which is more efficient than physical controls. d. If the same people are responsible for a series of related accounting activities is called Segregation of Duties.arrow_forwardSummarize the alleged fraud List which management assertions were violated In your opinion, what component(s) of the COSO framework were weak/missing? If you were to audit FTX’s cash, name 1-2 procedure(s) that you could have done to detect this fraudFOR Defendant concealed his diversion of FTX customers’ funds to crypto trading firm Alameda Research while raising more than $1.8 billion from investors The Securities and Exchange Commission today charged Samuel Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX Trading Ltd. (FTX), the crypto trading platform of which he was the CEO and co-founder. Investigations as to other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing. According to the SEC’s complaint, since at least May 2019, FTX, based in The Bahamas, raised more than $1.8 billion from equity investors, including approximately $1.1 billion from approximately 90 U.S.-based investors. In his…arrow_forward
- 2. FRAUD SCHEME PURCHASING AGENT A purchasing agent for a large hardware retailer has sole discretion in selecting vendors for the parts and supplies sold by the company. The agent directs a disproportionate number of purchase orders to a supply company owned by the agent's brother- in-law, which charges above-market prices for its products. The agent's relationship with the supplier is unknown to his employer. C ta th di Required What type of fraud is this, and what controls can be implemented to prevent or detect the fraud? Re a.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_forwardWhich of the following is NOT a trend in Corporate Fraud? a) Anti-fraud controls have little impact on reduced fraud losses and shorter fraud duration b) Tips are consistently the most common detection method c) Banking, financial services, government/public administration and manufacturing have the greatest number of fraud cases reportedarrow_forward
- The fraud triangle asserts that the following three factors must exist for a person to commit fraud. A. Opportunity B. Pressure C. Rationalization. Identify the fraud risk factor (A, B, or C) in each of the following situations.arrow_forwardDefine the following and give 1 actual case as an example for each type of fraid and methods of prevention.a) Counterfeiting Fraudb) Credit Card Fraudc) Embezzlement d) Insider Tradingarrow_forwardEach of the following scenarios is based on facts in anactual fraud. Categorize each scenario as primarily indicating (1)an incentive to commit fraud, (2) an opportunity to commitfraud, or (3) a rationalization to commit fraud. State your reasoningfor each categorization.a. There was intense pressure to keep the corporation’s stockfrom declining further. This pressure came from investors,analysts, and the CEO, whose financial well-being was significantlydependent on the corporation’s stock price.b. A group of top-level management was compensated (mostlyin the form of stock options) well in excess of what would beconsidered normal for their positions in this industry.c. Top management of the company closely guards internalfinancial information, to the extent that even some employeeson a need-to-know basis are denied full access.d. Managing specific financial ratios is very important to thecompany, and both management and analysts are keenlyobservant of variability in key ratios. Key…arrow_forward
- The following paragraphs describe fraudulent accounting committed by the company Gateway. After reading the paragraphs, list the journal entries you think 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. On September 21, 2000, Gateway's sales representative sent an e-mail to the consumer leasing company confirming that the consumer leasing company would issue a purchase order for $16.5 million of PCs, for which it would receive a 5% discount, that the consumer leasing company would be billed by September 30, 2000 and would take the PCs by October 31, 2000.arrow_forwardSadaf Oman Co. is using internal control procedures to mitigate the risks to which it is exposed. Listed below are some internal control procedures applicable to Sadaf Oman Co's revenues and receivable system. Match the most appropriate one of the following risks mitigated to the correct internal control procedure stated below. Risks mitigated: (A) Sales staff misappropriate sales receipts then write off bad debts in the general ledger (B) Sales are made to customers who cannot pay (C) Sales are not made to existing customers (D) Sales staff do not communicate with the accounts staff regularly, so the debt uncollected at the end of the period are written off in the ledger by the accounts staff (E) Customer refuses to pay for goods allegedly not received (F) Customer orders are not being fulfilled. (G) Revenues on books are overstated and exceed actual revenues in bank (H) Posting a sale that is beyond the credit limit of the customers ) Company employees steal collections (U) Without…arrow_forwardEach of the following scenarios is based on facts in actual fraud. Categorize each scenario as primarily indicating (1) an incentive to commit fraud (2) an opportunity to commit fraud or (3) a rationalization for committing fraud. Also state your reasoning for each scenario. a. There was intense pressure to keep the corporation's stock from declining further. This pressure came from investors, analysts and the CEO, whose financial well-being was significantly dependent on the corporation's stock price. b. Agroup of top-level management was compensated (mostly in the form of stock options) well in excess of what would be considered normal for their positions in the industry. c. 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. d. Managing specific financial ratios is very important to the company, and both management and analysts are keenly observant of variability in key…arrow_forward
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