Khristine Jackson Week 2 Homework July 19, 2014 The Sarbanes-Oxley Act of 2002 (SOX) was a direct output of the financial statement fraud that sank industry giants such as Enron and WorldCom. 1) What are the primary goals and tenets of SOX with respect to fraud? The primary goals and tenets of the Sarbanes-Oxley Act of 2002 (SOX) are to concentrate on improving the value of audits in an effort to remove fraud in order to keep the public’s attention as well as for the security of investors. In addition, SOX requests corporate management to be more accountable for both fraud prevention and detection. Similarly, corporate board is also more responsible for the occurrence of fraud with the company; under SOX, those who contribute in
Directly causing a proven loss. Uncovering a theft loss, exposing and stopping it can be challenging, but even more challenging may be recovering the loss against third parties for example the insurance company. The likelihood of recovery is considerably determined by the steps taken following the discovery. In dealing successfully with any employee theft, there are several basic steps: Conduct an immediate and accurate investigation. File a timely proof of loss with the insurance carrier.
This term encompasses common offenses such as breach of duty by malfeasance or misfeasance and favoritism, to more potent crimes such as embezzlement of public funds and bribery. In the case of embezzlement of public funds, one or more legally entrusted entities, conspires to act dishonestly in appropriating
What specific concealment techniques did Koorbatoff use? According to our textbook page 11, commit fraud is the theft of assets is the most common type of misappropriation. Many of the financial reporting involves overstatements of assets or revenues, understatements of liabilities, or failures to disclose information. On the other hand, conceal the fraud is to prevent detection when assets are stolen or overstated, perpetrators must keep the accounting equation in balance by inflating other assets or decreasing liabilities or equity. Concealment takes more effort and time and leaves more evidence of the theft or misrepresentation.
Protects investors. Sox was created to reduce statement fraud, after the fraud scandal by Enron and WorldCom. It was created to establish higher standards in companies accounting procedures. To make sure that the information provided in the financial statements is accurate. Also to be able to penalize the individuals responsible for the fraud and to provide protection to the individuals that provide information about fraud committed in the companies.
The cheating management is providing fake accounts and incurring inherent internal audit risks, however, it is the external auditors’ responsibility to remain a critical and suspicious thinking over these accounts and investigate any further misrepresentations in the publicly released financial statement. The audit team should also include more auditors in their discussion of the suspicious accounts and come to an integral and practical measure to dig deeper into the target company’s financial
They can easily use fraud to authorize payment for a false invoice. The accountant also should not be able to print checks and complete the bank reconciliation. It allows the accountant to perpetrate fraud because they have access to blank checks to write fake checks and then cover it up with their record keeping responsibility. Along with segregation of duties, this also violates independent internal verification. A different employee, separate from personnel responsibility for the information, should make the verification and should report any discrepancies to management.
Article Analysis Over the past several years, unethical business practices, specifically in the accounting and financial categories, have made the news headlines frequently. Corporate America has been hit by greed and an overwhelming desire to make money at any cost, including sacrificing strong ethics and a proper moral code. Unethical situations include treatment of employees and stakeholders, manipulating financial reporting, and selling known unsafe products. Manipulating financial reports most often begins at the top management within a company (Clement, 2006) in an effort to boost salaries for those senior executives. Hiding accurate earnings, reporting inventory sold when it was not, and recording erroneous cash flows are just some of the ways that corporations have used to side step proper ethics.
Fraud investigations are often suggested in order to deem the performance prevalent and appropriate. The investigation must be performed with careful reasoning and consideration. One of the most important tactics of the investigation begins with the interview. The interview is critical as it is the initial facet of the investigation. According to Krancher, Riley & Wells, (2013), “Interviewing is the systematic questioning of a person who has knowledge of events, people, evidence, and other details surrounding a fraud or forensic accounting issue” (pg.
Fraud is a deliberate misrepresentation that causes a person or business to suffer damages, often in the form of monetary losses. All of these elements are usually required for an act to be considered fraud; if someone lied about his name, for example, it would not be fraud unless in so doing, the person caused someone else to lose money or suffer some other damage. There are many different types, from identity theft to insurance fraud to falsifying tax information, and making false statements can often be one element of another crime. Although usually prosecuted in criminal court, fraud can also be tried under civil law. Elements of Fraud While different jurisdictions may have their own definitions, under common law in the United States, fraud includes the following elements: a representation, or statement, of fact; the falsity of that representation — the statement must be untrue; the statement must be material, meaning that it is important or relevant; the speaker must know the statement is false; the speaker intends the statement to be relied on; the hearer does not know the statement is not true; the hearer relies on the truth of the statement to make a decision; the hearer's right to rely on the statement — the hearer has no reason to think the statement might not be true; and the hearer must suffer some kind of damages.