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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Question
Chapter 2, Problem 11RQSC
To determine
Introduction: Misappropriation of assets refers to stealing or using company’s assets for personal purposes; whereas, fraudulent financial reporting refers to manipulating financial statements to represent a better picture of the financial position of the company.
To categorize: The frauds of companies into asset misappropriation or fraudulent financial reporting.
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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
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.
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!
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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- 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. The business has no cameras or security devices at its warehouse.arrow_forwardBelow are several statements about occupational fraud.1. For most large companies, occupational fraud is minimal and internal control procedures are unnecessary.2. Managers have a variety of reasons for manipulating the numbers in financial statements, such as maximizing their compensation, increasing the company’s stock price, and preserving their jobs.3. Internal control procedures include formal policies and procedures related to (1) safeguarding the company’s assets and (2) improving the accuracy and reliability of accounting information.4. “Cooking the books” is a phrase used by accountants to indicate the preparation of financial statements that are free of manipulation.5. Most occupational fraud cases involve misuse of the company’s resources.6. Common types of financial statement fraud include creating fictitious revenues from a fake customer, improperly valuing assets, hiding liabilities, and mismatching revenues and expenses.Required:State whether the answer to each of the…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_forward
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