to aggressive accounting and financial statement fraud, and provide descriptions of the conditions within the fraud triangle. In providing guidance to the Anonymous caller, we will compare the risks between resigning immediately and staying with the current company. Further, we will discuss other sources of advice for the caller, including legal advice and the State Board of Accountancy. In examining aggressive accounting and financial statement fraud: we will discuss the prevalence of such acts, the
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personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations (effective and efficient operations), reporting (accurate financial reporting) and compliance (compliance with laws and regulations) • Describe the 5 components of internal control, related examples of each, and how each contributes to the overall control system within an entity (CRIME) 1. Control Environment: The foundation for the other internal control components; it is defined by the
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its financial statements for several reasons. First of all, due to the desired increasing growth, there is now a greater risk that salesmen and/or managers could report inflated numbers that align with management’s goals. An independent audit would be beneficial in discovering any such activity. Also, if McIver’s acquires the other swimwear distributorship there is an added risk. McIver’s probably does not have an in-depth knowledge of the other company, so an independent audit could also bring to
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1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. In the Complaint filed by the United States Department of Justice, Southern District of New York (The United States Department of Justice, 2008), United States v. Bernard L. Madoff, 09 Cr 213 (DC), the government alleged that: Madoff committed 11 counts of securities fraud, investment advisor fraud (wherein
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incentive, opportunity and attitude. There are various factors present at WM that are indicative of each of the three fraud conditions. Firstly, the factors present at WM that are indicative of the incentive or pressure to perpetrate fraud are WM paid large audit fees as well as other related fees to the external auditor AA. This incentive causes AA to treat WM as valuable client and agree to compromise with the company to commit fraud. The other factor is the strong interest of the management in employing
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Consideration of Fraud in a Financial Statement Audit 1719 AU Section 316 Consideration of Fraud in a Financial Statement Audit (Supersedes SAS No. 82.) Source: SAS No. 99; SAS No. 113. Effective for audits of financial statements for periods beginning on or after December 15, 2002, unless otherwise indicated. Introduction and Overview .01 Section 110, Responsibilities and Functions of the Independent Auditor, paragraph .02, states, "The auditor has a responsibility to plan and perform
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Chapter #1 1. What is assurance engagement? * An engagement performed by an auditor to enhance the reliability of the subject matter * Involves auditor arriving at an opinion about the fair representation of financial statements 2. Explain why there is a demand between types of assurance services * Users demand audited financial statements because of their remoteness from the entity, accounting complexity their incentives competing with those of the entity’s manager and
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understanding of the client’s business an audit firm can successfully audit a new industry. Identify and briefly describe the specific fraud risk factors present during the 2000 NextCard audit. How should these factors have affected the planning and execution of that engagement? There are specific fraud risk factors that were apparently present during the 2000 NextCard audit. Those fraud risk factors are listed below. (A) NextCard’s management team did not have a good internal audit team set up. NextCard
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independence of the existing external auditors? Explain. (3pts) (c) How did the Sarbanes-Oxley Act of 2002 and related rulings by the PCAOB, SEC or AICPA affect a public company's ability to hire members of its external audit team? (3pts) 2 (a) What factors in the auditor-client relationship can put the client in a more powerful position than the auditor? (3pts) A) A client can be put in a more powerful position than the auditor in an auditor-client relationship if the auditor is trying to sell the
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financial reporting, it appears that fraud in its various forms is a problem that is increasing in frequency and severity. KPMG’s Fraud Survey 2003 documented a marked increase in overall fraud levels since its 1998 survey, with employee fraud by far the most common type of fraud. The 2003 survey also noted that fraudulent financial reporting had more than doubled from 1998. This trend is consistent with the unprecedented recent spate of large accounting frauds (Enron, WorldCom), as well as the increased
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