Writing Homework 2
.docx
keyboard_arrow_up
School
University of Houston, Downtown *
*We aren’t endorsed by this school
Course
6312
Subject
Accounting
Date
Apr 3, 2024
Type
docx
Pages
5
Uploaded by CorporalMole156 on coursehero.com
Writing Homework 2
Read Enron Corporation and Andersen, LLP, Cendant Corporation, Waste Management, Inc.
Answer the following questions.
1.
In your own words, summarize how Enron used SPEs to hide large amounts of company debt.
2.
Professional standards recognize there is a possibility that management may override internal controls. Provide an example where management override occurred in the Cendant fraud.
3.
Why was Toby able to continue his offense for several months? What changes would you
recommend to prevent similar occurrences? 2. What are the three characteristics that
distinguish white-collar crimes from other types of crime? Explain how these
characteristics are illustrated in Toby’s case. 3. Do you think white-collar crimes, such as
the one Toby committed, are caused only by individual moral weaknesses or are other
factors involved? If other factors are involved, what are they?
Instructions:
Please submit the writing homework via Canvas. The assignments are meant to challenge your critical thinking, problem solving and knowledge on audit rule(s)/standard(s) in the context of specific problems facing the (internal and external) auditing industry. Students are expected to provide primary accounting/auditing issues of each case and relate them into the guidance of audit standards/rules, and demonstrate individual decisions/stances for each specific situation. You may need to search from supplemental readings to better understand the related professional/audit standards. In order to receive full credit, the submission should be completed on at least one-page Microsoft word file, single space, times new roman font, and size 12. Supplemental Reading
PCAOB Standards and Related Rules. Information may be found at www.sec.gov
, www.aicpa.org
,
www.pcaobus.org
, www.coso.org
,
www.cpaboard.state.la.us
,
www.tsbpa.state.tx.us
, www.isaca.org, etc
Vu Nguyen
MBA-6312 Dr. Yiding Wang
1/25/2024
Answers
1.
In your own words, summarize how Enron used SPEs to hide large amounts of company debt.
Enron used a complex scheme involving Special Purpose Entities (SPEs) to hide large amounts of debt from its financial statements. They:
Created an intricate and complex network of SPEs: These off-balance-sheet entities were controlled by Enron executives but not included in its official financials. Three most prominently mentioned were: Chewco, LJM2, and Whitewing.
Transferred debt and assets: Enron moved debt and underperforming assets to these SPEs, thereby removing them from its own books, making its own books look better.
Engaged in complex transactions: Enron engaged in intricate financial transactions with these SPEs, involving the sale of assets and the issuance of securities. The complexity of these transactions made it difficult for outsiders, including investors and regulators, to fully understand the true financial picture of
the company
.
Used mark-to-market (MTM) accounting: This method allowed Enron to book profits even before they were realized, inflating its reported earnings.
Manipulated statements and lacked oversight: Enron hid its SPE obligations and misled investors, while accounting firms failed to raise concerns.
This elaborate scheme allowed Enron to present a false image of financial health for an extended period, ultimately contributing to its dramatic downfall.
2.
Professional standards recognize there is a possibility that management may override internal controls. Provide an example where management override occurred in the Cendant fraud.
The Cendant Corporation accounting scandal in the late 1990s is a notable example where management override of internal controls played a crucial role. Cendant was a conglomerate formed through the merger of CUC International and HFS Incorporated.
In the Cendant fraud case:
Inflated Revenue Recognition:
o
Override by Management: Top executives, including the Chairman Walter Forbes and Vice Chairman E. Kirk Shelton, orchestrated a massive financial fraud by inflating the company's financial results.
o
Fraudulent Activity: Management manipulated revenue recognition practices, recognizing fictitious revenue and inflating the company's financial performance to meet investor expectations.
False Financial Statements:
o
Override by Management: The fraud involved overriding internal controls related to financial reporting and disclosure.
o
Fraudulent Activity: Management intentionally manipulated financial statements and misled auditors and investors by providing false and misleading information about the company's financial health.
Auditor Independence Issues:
o
Override by Management: Management exerted influence over the external auditors, Ernst & Young, compromising their independence.
o
Fraudulent Activity: Auditors failed to detect the fraud due to management's ability to manipulate and override controls, and this lack of auditor independence contributed to the fraud going undetected for a prolonged period.
Stock Price Manipulation:
o
Override by Management: Cendant's top executives were motivated by the desire to boost the company's stock price and enhance their personal financial gains.
o
Fraudulent Activity: The manipulation of financial statements and misrepresentation of the company's financial performance were aimed at maintaining an artificially high stock price, deceiving investors about the company's actual financial health.
The Cendant scandal highlights how management override of internal controls, along with other governance failures and ethical lapses, can lead to significant financial fraud. As a result of the scandal, the company experienced a sharp decline in its stock price, lawsuits, and significant financial and reputational damage. It also prompted increased scrutiny of corporate governance practices and the role of auditors in detecting and preventing financial fraud.
3.
Why was Toby able to continue his offense for several months? What changes would
you recommend to prevent similar occurrences? 2. What are the three
characteristics that distinguish white-collar crimes from other types of crime?
Explain how these characteristics are illustrated in Toby’s case. 3. Do you think
white-collar crimes, such as the one Toby committed, are caused only by individual
moral weaknesses or are other factors involved? If other factors are involved, what
are they?
Tony was able to continue his offense for several months was contributed by two factors. First and most importantly, neither the bank holding his warehouse credit line nor
his auditors were diligent in checking the facts underlying his applications or his general financial situation (no oversight of his actions). Even though the auditors and the warehouse lenders knew he was losing money on some of his loans. Second, Toby had the cooperation, trust of people in his company and people in other companies in the real estate industry that he has done businesses with to help him prepare the supporting documents that he needed to falsify supporting documents for his fictitious loan applications.
I would recommend the following steps to be taken in the future to prevent similar occurrences:
Implementing of internal controls specially those related to financial transactions and reporting. Segregation of duties, in which no single individual has control over an entire process.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Case 1: Fraud examination
Karen, a friend of yours, recently started her own business, The Bike and Boulder
Company (B&B). B&B specializes in the sales of mountain bikes and rock- climbing
equipment. Karen is putting the finishing touches on her company policies and
procedures. She knows you are taking a fraud class and asks you to review what
she has completed thus far. You quickly notice that Karen has neglected to address
fraud and fraud prevention in her policies and procedure. What policies and
procedures would you suggest Karen implement to prevent and detect fraud at B&B?
arrow_forward
Consider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any?
A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last year, she won employee of the year and is a valued employee. Through the grapevine, Susan's boss just learned that Susan's brother has a gambling problem.
B. Now suppose that Susan from situation A is now secretary for the head of the marketing department. She keeps track of the vice president of marketing's schedule and handles the correspondence.
C. Keith has been employed for 6 months as a teller at a community bank. All is going well, and his cash drawer has had shortages only twice (of less than P500). The shortages were traced and the problems corrected.
D. At the company Memorial Day picnic and golf outing last week, Nancy noticed that June moved her ball to a better lie when she thought no one was looking. There…
arrow_forward
What is NOT an example of rationalization as one of the three elements causing a person to commit fraud?
CA The company will never miss it
CB. Employer pressure to report fictitious accounting results
c. This replaces my bonus that was suspended this year
CD. I will repay the "loan" before anyone misses it
arrow_forward
Match each situation with the fraud triangle factor-opportunity, financial pressure, or rationalization-that best describes it.
a.
An employee's monthly credit card payments are nearly 75% of his or her monthly earnings.
Financial Pressure
Rationalization
An employee earns minimum wage at a firm that has reported record earnings for each of the
last five years.
b.
Opportunity
C.
An employee has an expensive gambling habit.
An employee has check-writing and signing responsibilities for a small company, as well as
d.
reconciling the bank account.
arrow_forward
In the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…
arrow_forward
1. "The steps in the accounting cycle for a merchandising company are different from the accounting
cycle for a service company." Do you agree or disagree? Explain.
2. A local bank reported that it lost $150,000 as the result of an employee fraud. Mr. X is not clear
on what is meant by an "employee fraud." Explain the meaning of fraud to Mr. X and give
examples of frauds that might occur at a bank.
3. On September 1, ABC Company had an inventory of 30 calculators at a cost of $18 each. The
company uses a perpetual inventory system. During September, the following transactions
occurred. Sept. 6 Purchased 80 calculators at $20 each from DeVito Co. for cash. Sept. 9 Paid
freight of $80 on calculators purchased from DeVito Co. Sept. 10 Returned 2 calculators to DeVito
Co. for $42 credit (including freight) because they did not meet specifications. Sept. 12 Sold 26
calculators costing $21 (including freight) for $31 each to Mega Book Store, terms n/30. Sept. 14
Granted credit of $31 to Mega…
arrow_forward
Which of the following is NOT a behavioral red flag of the fraudster?
a) Addictions
b) Switches jobs every 2-3 years
c) Peer pressure
d) Living beyond means
arrow_forward
Pls explain first how you solve it. Thank you.
F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any.
You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales.
Further examination of the company's records reveals the following balances at November 15,2021:
arrow_forward
Match each situation with the fraud triangle factor (opportunity, financial pressure, or rationalization) that best describes it.
(a). An employee has check-writing and -signing responsibilities for a small company, and is also responsible for reconciling the bank account.
(b) An employee earns minimum wage at a firm that has reported record earnings for each of the last five years.
(c) An employee has an expensive gambling habit.
(d) An employee's monthly credit card payments are nearly 75% of her monthly earnings
arrow_forward
Subject: Accounting Information System
ETHICS, FRAUD, AND INTERNAL CONTROL
Stated Problem:
EXPENSE ACCOUNT FRAUD
While auditing the financial statements of Petty Cor-poration, the certified public accounting firm of TrueBlue and Smith discovered that its client’s legal expenses account was abnormally high. Further investigation of the records indicated the following:•Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.•Swindle, Fox, and Kreip were not Petty Corporation's attorneys.
A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk.
Boghas’s other duties included performing the end-of-month bank reconciliation.
Subsequent investigation revealed that Swindle,Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.…
arrow_forward
Item A. Fraud
Facts:
Susan Green has worked for ABC Company (“ABC”) as the executive secretary in the administrative department for over 10 years. Her apparent integrity and dedication to her work has earned her the reputation of being an outstanding employee and has resulted in increased responsibilities. Her present responsibilities include making arrangements for outside feasibility studies, maintaining client files, working with outside marketing consultants, initiating the payment process, and notifying the accounting department of all openings or closings of vendor accounts.
During Susan’s first five years of employment, ABC subcontracted all of its feasibility and marketing studies through Adams and Co. This relationship was subsequently terminated because Adams and Co. merged with a larger, more expensive consulting group. After termination of Adams and Co., Susan and her supervisor selected a new firm to conduct ABC’s market research. However, Susan never informed the…
arrow_forward
Internal Control-Fraud Triangle
Identify the fraud triangle risk factor (opportunity-O, pressure-P or
rationalization-R) in each situation.
1.
2.
3.
Employeees are told to report increased income or be fired.
Several sales clerks share the same cash drawer.
A worker did not receive a bonus this year and now feels it's okay
to use the company credit cared for personal expenses.
4.
Doors safeguarding valuable merchandise are not locked with a
passcode.
An employee feels underpaid and believes stealing inventory is
justified.
5.
arrow_forward
5. What does Tina mean in her statement to the Clare County Review "the effects of an
embezzlement are far reaching and detrimental for everyone"? Who were all the stakeholders
that were all affected in this case? How was each of them harmed?
6. Jenifer was caught embezzling via the payroll system, how else might she have been stealing
from the company that was never proven?
7. Why do you think Jenifer embezzled the money?
8. Do you think her sentencing is too lenient, too harsh, or is appropriate? Why?
9. What would you do if your friend and employee was stealing from a company that you owned?
arrow_forward
1. How do you understand Fraud in your own words? Please provide explanation.
2. How do you understand the Fraud Triangle? Please provide explanation.
3. Favorite topic in Forensic Accounting?
4. What recommendations will you give to prevent fraud?
5. Will you consider becoming a Fraud investigator in the Future? Why or why not.
arrow_forward
Question 1
The following internal control procedures are followed in Trisha’s Office Supplies:
(a) Cash and Banking
Johanne has been working as the cashier for Trisha’s Office Supplies for the last five years and apart from receiving and recording cash received, she also prepares banking and does deposits in the bank.
(b)Debtors and Creditors
There were several occasions when sales staffs have approved large credit sales and recently business’s bad debts have significantly increased.
(c)Fixed Assets
The business has three delivery vans and the drivers are allowed to keep the van after work and during the weekends. Recently it is noticed that there is high cost of van repairs and maintenance and fuel consumption while the sales have declined.
(d)Inventory
There are no perpetual records in Trisha’s Office Supplies, the store clerk does not keep records of goods received or issued. A physical count is done on a monthly basis by the store clerk under supervision.
(e)Wages and…
arrow_forward
Forensic Accounting: Assurance Engagement 2: Net Worth Analysis. You can use the computer-based Electronic Workpapers on the textbook website to prepare the net worth analysis required in this problem.Net worth analysis is performed when fraud has been discovered or is strongly suspected and the information to calculate a suspect’s net worth can be obtained (e.g., asset and liability records, bank accounts). The procedure used is to calculate the person’s change in net worth (excluding changes in market values of assets) and to identify the known sourcesof funds to finance the changes. Any difference between the change in net worth and the known sources of funds is called funds from unknown sources, which might include illgotten gains.Nero has worked for Bonne Consulting Group (BCG) as the executive secretary for administration for nearly 10 years. Her dedication has earned her a reputation as an outstanding employee and has resulted in increasing responsibilities. Nero is also a…
arrow_forward
Required information
[The following information applies to the questions displayed below.]
Fraud Investigators Incorporated operates a fraud detection service.
a. On March 31, 10 customers were billed for detection services totaling $24,000.
b. On October 31, a customer balance of $1,450 from a prior year was determined to be uncollectible and was written off.
c. On December 15, a customer paid an old balance of $790, which had been written off in a prior year.
d. On December 31, $490 of bad debts were estimated and recorded for the year.
2. Complete the following table, indicating the amount and effect (+ for increase,- for decrease, and NE for no effect) of each
transaction. Ignore income taxes.
Transaction Net Receivables Net Sales
a.
b.
C.
d.
Income From
Operations
arrow_forward
useful information" Relevent, Reliable, Complete, Timely, Understandable, Verifiable, Accessible." Identify which of the criteria is violated in the below situations:
a) Joe and Bob are both conducting a bank reconciliation. They are using the same reports and information, but come to different answers
b) A job applicant fails to tell the interviewees that he was previously in jail for murdering his former boss.
c) Dr. Goldstein's father-in-law is vacationing in Myrtle Beach for the winter, and frequently calls Dr. G. in the morning to tell him the temperature in Mrytle Beach, even though Dr. G. is in Buffalo.
d) The computer system crashed and Mr. Jones could not obtain the information he needed for an important meeting.
arrow_forward
useful information" Relevent, Reliable, Complete, Timely, Understandable, Verifiable, Accessible." Identify which of the criteria is violated in the below situations:
a) Joe and Bob are both conducting a bank reconciliation. They are using the same reports and information, but come to different answers
b) A job applicant fails to tell the interviewees that he was previously in jail for murdering his former boss.
c) Dr. Goldstein's father-in-law is vacationing in Myrtle Beach for the winter, and frequently calls Dr. G. in the morning to tell him the temperature in Mrytle Beach, even though Dr. G. is in Buffalo.
d) The computer system crashed and Mr. Jones could not obtain the information he needed for an important meeting.
We find that they use the same settlement method, but they make a mistake because they do not work together or that the method of accessing the data is incorrect, and this works to make each of them get different answers.
The student has indeed failed to inform this…
arrow_forward
CASE: You are a fraud expert and have been asked to investigate possible wrongdoing at a local nonprofit organization. You suspect that one of
the workers, Stacey, has been embezzling money. After securing enough evidence to be very confident of Stacey's guilt, you speak with the
president of the organization, Jamie. Jamie assures you that Stacey could be doing nothing wrong, that she has known Stacey for years, and
Stacey is a good person. Further, she indicates that because of her relationship with Stacey, even if something were going wrong, no action would
be taken with respect to the potential fraud.
QUESTIONS:
1)How do you respond to Jamie? How do you explain to her what is at stake?
2) What monitoring and control systems should have been in place at Jamie's organization to prevent such a behavior? Explain.
3)Would you recommend an ethics audit to this company? Why?
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Related Questions
- Case 1: Fraud examination Karen, a friend of yours, recently started her own business, The Bike and Boulder Company (B&B). B&B specializes in the sales of mountain bikes and rock- climbing equipment. Karen is putting the finishing touches on her company policies and procedures. She knows you are taking a fraud class and asks you to review what she has completed thus far. You quickly notice that Karen has neglected to address fraud and fraud prevention in her policies and procedure. What policies and procedures would you suggest Karen implement to prevent and detect fraud at B&B?arrow_forwardConsider each of the following situations. Is there a potential problem? Which part of the fraud triangle is involved, if any? A. Susan is an accounts payable clerk. She sets up creditors in a financial database and pays invoices as they come in. Last year, she won employee of the year and is a valued employee. Through the grapevine, Susan's boss just learned that Susan's brother has a gambling problem. B. Now suppose that Susan from situation A is now secretary for the head of the marketing department. She keeps track of the vice president of marketing's schedule and handles the correspondence. C. Keith has been employed for 6 months as a teller at a community bank. All is going well, and his cash drawer has had shortages only twice (of less than P500). The shortages were traced and the problems corrected. D. At the company Memorial Day picnic and golf outing last week, Nancy noticed that June moved her ball to a better lie when she thought no one was looking. There…arrow_forwardWhat is NOT an example of rationalization as one of the three elements causing a person to commit fraud? CA The company will never miss it CB. Employer pressure to report fictitious accounting results c. This replaces my bonus that was suspended this year CD. I will repay the "loan" before anyone misses itarrow_forward
- Match each situation with the fraud triangle factor-opportunity, financial pressure, or rationalization-that best describes it. a. An employee's monthly credit card payments are nearly 75% of his or her monthly earnings. Financial Pressure Rationalization An employee earns minimum wage at a firm that has reported record earnings for each of the last five years. b. Opportunity C. An employee has an expensive gambling habit. An employee has check-writing and signing responsibilities for a small company, as well as d. reconciling the bank account.arrow_forwardIn the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…arrow_forward1. "The steps in the accounting cycle for a merchandising company are different from the accounting cycle for a service company." Do you agree or disagree? Explain. 2. A local bank reported that it lost $150,000 as the result of an employee fraud. Mr. X is not clear on what is meant by an "employee fraud." Explain the meaning of fraud to Mr. X and give examples of frauds that might occur at a bank. 3. On September 1, ABC Company had an inventory of 30 calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred. Sept. 6 Purchased 80 calculators at $20 each from DeVito Co. for cash. Sept. 9 Paid freight of $80 on calculators purchased from DeVito Co. Sept. 10 Returned 2 calculators to DeVito Co. for $42 credit (including freight) because they did not meet specifications. Sept. 12 Sold 26 calculators costing $21 (including freight) for $31 each to Mega Book Store, terms n/30. Sept. 14 Granted credit of $31 to Mega…arrow_forward
- Which of the following is NOT a behavioral red flag of the fraudster? a) Addictions b) Switches jobs every 2-3 years c) Peer pressure d) Living beyond meansarrow_forwardPls explain first how you solve it. Thank you. F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any. You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales. Further examination of the company's records reveals the following balances at November 15,2021:arrow_forwardMatch each situation with the fraud triangle factor (opportunity, financial pressure, or rationalization) that best describes it. (a). An employee has check-writing and -signing responsibilities for a small company, and is also responsible for reconciling the bank account. (b) An employee earns minimum wage at a firm that has reported record earnings for each of the last five years. (c) An employee has an expensive gambling habit. (d) An employee's monthly credit card payments are nearly 75% of her monthly earningsarrow_forward
- Subject: Accounting Information System ETHICS, FRAUD, AND INTERNAL CONTROL Stated Problem: EXPENSE ACCOUNT FRAUD While auditing the financial statements of Petty Cor-poration, the certified public accounting firm of TrueBlue and Smith discovered that its client’s legal expenses account was abnormally high. Further investigation of the records indicated the following:•Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.•Swindle, Fox, and Kreip were not Petty Corporation's attorneys. A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk. Boghas’s other duties included performing the end-of-month bank reconciliation. Subsequent investigation revealed that Swindle,Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.…arrow_forwardItem A. Fraud Facts: Susan Green has worked for ABC Company (“ABC”) as the executive secretary in the administrative department for over 10 years. Her apparent integrity and dedication to her work has earned her the reputation of being an outstanding employee and has resulted in increased responsibilities. Her present responsibilities include making arrangements for outside feasibility studies, maintaining client files, working with outside marketing consultants, initiating the payment process, and notifying the accounting department of all openings or closings of vendor accounts. During Susan’s first five years of employment, ABC subcontracted all of its feasibility and marketing studies through Adams and Co. This relationship was subsequently terminated because Adams and Co. merged with a larger, more expensive consulting group. After termination of Adams and Co., Susan and her supervisor selected a new firm to conduct ABC’s market research. However, Susan never informed the…arrow_forwardInternal Control-Fraud Triangle Identify the fraud triangle risk factor (opportunity-O, pressure-P or rationalization-R) in each situation. 1. 2. 3. Employeees are told to report increased income or be fired. Several sales clerks share the same cash drawer. A worker did not receive a bonus this year and now feels it's okay to use the company credit cared for personal expenses. 4. Doors safeguarding valuable merchandise are not locked with a passcode. An employee feels underpaid and believes stealing inventory is justified. 5.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage