Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Question
Chapter 2, Problem 5TFQ
To determine
Introduction:Fraudulent financial reporting is referred to as manipulating financial statements to achieve certain objectives. Fraudulent financial reporting is conducted by higher level management and affects various stakeholders.
To explain:Whether one of the ways in which Company E covered up the fraud is by shifting the debts to a special purpose entity.
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If a company reported fi ctitious revenue, it could try to cover up its fraud by: A . decreasing assets.
If a company reported fi ctitious revenue, it could try to cover up its fraud by: B . increasing liabilities.
How can fraud be detected in the financial statements?
Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2TFQCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 4TFQCh. 2 - Prob. 5TFQCh. 2 - Prob. 6TFQCh. 2 - Prob. 7TFQCh. 2 - Prob. 8TFQCh. 2 - Prob. 9TFQCh. 2 - Prob. 10TFQ
Ch. 2 - Prob. 11TFQCh. 2 - Prob. 12TFQCh. 2 - Prob. 13MCQCh. 2 - Prob. 14MCQCh. 2 - Prob. 15MCQCh. 2 - Prob. 16MCQCh. 2 - Prob. 17MCQCh. 2 - Prob. 18MCQCh. 2 - Prob. 19MCQCh. 2 - Prob. 20MCQCh. 2 - Prob. 21MCQCh. 2 - Prob. 22MCQCh. 2 - Prob. 23MCQCh. 2 - Prob. 24MCQCh. 2 - Prob. 25RSCQCh. 2 - Prob. 26RSCQCh. 2 - Prob. 27RSCQCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 29RSCQCh. 2 - Prob. 30RSCQCh. 2 - Prob. 31RSCQCh. 2 - Prob. 32RSCQCh. 2 - Prob. 33RSCQCh. 2 - Prob. 34RSCQCh. 2 - Prob. 35RSCQCh. 2 - Prob. 36RSCQCh. 2 - Prob. 37RSCQCh. 2 - Prob. 38RSCQCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 40RSCQCh. 2 - Prob. 41RSCQCh. 2 - Refer to Exhibit 2.5 and answer the following...Ch. 2 - Prob. 43RSCQCh. 2 - Prob. 44RSCQCh. 2 - Prob. 45RSCQCh. 2 - Prob. 46RSCQCh. 2 - Prob. 47RSCQCh. 2 - Prob. 48RSCQCh. 2 - Prob. 49RSCQCh. 2 - Prob. 50FFCh. 2 - Prob. 51FFCh. 2 - Prob. 52FF
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- The 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. No one matches the cash in the register to receipts when shifts end.arrow_forwardAccounts 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_forwardThe fraud scheme that is similar to the ‘‘borrowing from Peter to pay Paul’’ scheme is a. expense account fraud. b. bribery. c. lapping. d. transaction fraud.arrow_forward
- Which is NOT a source of fraud risk (from the Fraud Triangle)? a) Fraud Tip Hotline b) Perceived Opportunity c) Rationalization d) Financial Pressurearrow_forwardExplain, what types of fraud scheme is Steinhoff likely to use to commit financial statement fraud?arrow_forward(1) How does double-entry bookkeeping helpeliminate errors? (2) Why is accrual-based accountingconsidered more fraud-proof than cash-basedaccounting?arrow_forward
- Funds are embezzled from a company, what type of fraud was committed and describe the symptoms of fraud that might be evident to an investigator?arrow_forwardThe company is not preparing bank accounts reconciliations. This is an example of: * O Audit risk O Control risk Detection Risk Inherent riskarrow_forwardWhich of the following is not fraud: a. False accounting b. Computer fraud c. Copywrite d. Theftarrow_forward
- Briefly explain what is meant by the risk of ‘Fraud in Revenue Recognition’ Is there always a presumed risk of ‘Fraud in Revenue Recognition’? Explain your answer (c) Explain 4 Fraud Risk Factors that may heighten the risk of fraudulent financial reporting or misappropriation of assets. Answer in the table below: Risk Factor 1 2 3 4arrow_forwardWhy is it important for companies to analyze revenue and accounts receivable? How can these areas lend themselves to fraud when left with lack of segregation of duties, weak controls and recordkeeping delays?arrow_forwardConsider how an organization must manage cash and receivables. Which of the two is the most important to manage? Is one more susceptible to fraud and errors than the other? Explain your answer. How would a misstatement in each affect an organization?arrow_forward
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