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Each of the following scenarios is based on facts in an actual fraud. Categorize each scenario as primarily indicating (1) an incentive to commit fraud, (2) an opportunity to commit fraud, or (3) a rationalization for committing fraud. Also state your reasoning for each scenario.
a. There was intense pressure to keep the corporation's stock from declining further. This pressure came from investors, analysts, and the CEO, whose financial well-being was significantly dependent on the corporation's stock price.
b. A group of top-level management was compensated (mostly in the form of stock-options) well in excess of what would be considered normal for their positions in this industry.
c. 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.
d. Managing specific financial ratios is very important to the com- pany, and both management and analysts are keenly observant of variability in key ratios. Key ratios for the company changed very little even though the ratios for the overall industry were quite volatile during the time period.
the following are independent situations and you should refer to apes accounting professional and ethical standards 110
Who is responsible for the preparation of and information within the company's financial statement?
Control risk has been assessed as high and detection risk is low. What is the timing of the substantive procedures likely to be and the auditor has decided that they will use a larger sample for confirmations at year end. What is the level of detecti..
topic a number of corporate failures took place in australia and united states between 2000 and 2002 causing major
Owner invests cash in exchange for stock and pays cash for employee wages, incurs legal costs on credit and receives cash for services provided
Green Pastures is a 400-acre farm on the outskirts of the Kentucky bluegrass, specializing in the boarding of broodmares and their foals. A recent economic downturn in the thoroughbred industry has led to a decline in breeding activities, and it h..
Making reference to the ratios you calculated in part a) and the additional information provided, describe what you consider to be the risk factors that will impact on the audit of receivables and inventory.
Prepare an additional report for John that outlines - the internal controls in the system that are potentially effective, the risk that the control could mitigate and one ‘test of control' for each of the identified potentially effective controls.
AFR Company's internal audit function recently completed an audit of the Company's various employee benefit plans. The internal auditors' working papers contain the following audit observation
What is the relationship between audit risk and materiality in auditing and if you were an audit partner planning an audit, how would you evaluate the risk of your client?
Identify the company's independent registered public accounting firm. Determine how long this firm has served as the external auditors and other services, if any, provided to or on behalf of the company.
Which of these two controls would cost less and prove more effective? Is there a different, more cost effective strategy we should consider?
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