For example in reference to overstated revenues; computer assisted audit techniques can be useful in identifying unusual or unexpected revenue relationships or anomalies in transactions. Essentially computer programs can be programed look for anomalies in many areas of fraud as well as being able to separate and keep evidence organized by category which can be essential when going to court to give testimony. 3- 9. Where might financial statement fraud occur in a company (e.g., what are some red flags)? According to SAS No.
Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses. 4. Depository institutions are supposed to be managed to limit risk.
Read the case study and map the fraud case to the appropriate expense report fraud flow in Chapter 7 (Exhibit 7.4 or 7.5 or 7.6). In a 2-3 page paper address the following questions: which fraud flow and specific steps did the fraudster manipulate and how will the new processes installed deter, detect or prevent this from recurring? Travel and expense reimbursement schemes may seem like they are an easy fraud to perpetrate, however, the recurring problem is that people wind up getting too greedy and get caught because of it. Lucky for us the fraudster’s greed leads them to get sloppy when they believe that a fraud is going to continue to go undetected. This was the case in the article “Fashioning a Fraud” by Bethmara Kessler.
Cite illustrative examples of the differences. Fraud is defined as the intentional deception used for personal gain or to hurt another individual or it can be put simply as theft by deception. Under the common law there are four general elements that must be present for a fraud to exist (Wells 2008). The first element is a material false statement. The second is knowledge that the statement provided was completely false.
Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.). Many banks and financial institutions began collapsing which led to irretrievable, uninsured deposits and savings. Fearing further loss, people began spending less which led to a decrease in production and an increase in unemployment. As companies began to fail, the government devised the Smoot-Hawley Tariff in order to protect American businesses. The Tariff placed high taxes on imports leading to a decline in international trade.
AU1 Assignment 2 Task 1: Purpose of auditing a. Information risk is the risk that the financial statements cannot appropriately present business activities, and provide false and/or misleading information to the financial statements users. There are some causes that arise information risk, two of them are: The first one is Asymmetry of information. It arises due to remoteness of information, bias or motivation of those providing information, high volumes of transactions and data, and the complexity of transaction. The second one is errors from weak accounting system.
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.
4 Three conditions that are usually present when financial fraud occurs is the fraud risk triangle, the existence of an incentive and/or pressure to commit a fraud, the opportunity to commit a fraud is present (typically due to ineffective internal controls), and the ability to rationalize fraudulent conduct on the part of the given or potential fraudster. The phrase “fraud risk factors.” These factors are events or circumstances or “conditions” that indicate that one or more of the three elements of the fraud triangle are present. A few examples of fraud risk factor are a high degree of competition in industry which force or pressure individuals to commit fraud, negative cash flows, and significant related party transactions. 5 • Requiring independent auditors to immediately report suspected fraud to regulatory law enforcement • Establishing a government audit agency to “take over” the independent audit function. In • More rigorous and intense training programs to ensure that government regulators, such as SEC personnel, have the proper background to carry out their oversight responsibilities.
The accounting practices created a scandal in which the companies were able to hide information from investors. This allowed the stock prices to remain high even when the company was struggling. When the companies collapsed, investors became worried about the overall securities markets. The Sarbanes-Oxley act is a response to the corruption with the attempt to improve business accounting regulations. The act is considered the most extensive increase in regulations since the Security and Exchange Act of 1934.
Wrongful convictions are the result of the court system admitting insufficient evidence into court. The court system has many ways to help reduce or eliminate the causes of wrongful convictions. The court system can help reduce or eliminate these causes of wrongful convictions by first identifying why wrongful convictions occur. Wrongful convictions occur primarily due to eye-witness misidentification, false confessions, improper forensic science, government misconduct, informants, and bad attorneys (University, 2009). Ways to reduce or eliminate the cause of wrongful convictions by eye-witness misidentification by put into operation the following procedures that have been shown to reduce the amount of wrongful convictions through the use of eye-witness identification.