Reference no: EM131460945

There are 4 questions for this exercise. All answers must be clearly explained and consist of one resource per answer with in text citation as well.

The fraud triangle, ethics, and the Sarbanes-Oxley Act (for 1 & 2)

The CEO and the CFO of Automation Company were both aware that the company's controller was reporting fraudulent revenues. Upper level executives are paid very large bonuses when the company meets the earnings goals established in the company's budgets. While the CEO pushed the CFO and controller to "make the numbers", he had not told him to "make up the numbers" Besides, he could plead ignorance if the fraud was ever discovered. The CFO knew he should prohibit the fraudulent reporting but also knew the importance of making the numbers established in the budget. He told himself that it wasn't just for his bonus but for the stockholders as well. If the actual earnings were below the budgeted target numbers, the stock price would drop and the shareholders would suffer. Besides, he believed that actual revenues would increase dramatically in the near future and they could cover for the fraudulent revenue by underreporting these future revenues. He concluded that no one would get hurt and everything would be straightened out in the near future.

1. Explain why the internal control practice of separation of duties failed to prevent the fraudulent reporting (250 word minimum)

2. Identify and discuss the elements of the fraud triangle that motivated the fraud. (250 word minimum)

QUESTION A & B

A. Distinguish between financial accounting and managerial accounting as to user groups and time horizons. (300 word minimum)

B. Why should the chief accountant of an organization have a clear understanding of both financial and managerial account? (300 word minimum)