Dickinson Technologies Essays

1577 Words Apr 20th, 2008 7 Pages
Question 1. Assessing the Fraud Risk Factors: High Risk factors and Low Risk Factors.

High Risk Factors:

1. Management’s attitude towards overriding controls: Section 5, under topic Integrity and ethical values, of the questionnaire suggests that override could occur without management’s approval, manager’s override is not explicitly prohibited and no interventions by the management were observed.
2. The Degree of oversight related to the company’s control structure exercised by the management: Section 4, under topic Assignment of Authority and responsibility, of the questionnaire suggests that the Supervisors have broad levels of authority and the responsibility of day-to-day decisions lies on the shoulders of the supervisors and
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It is evident from the questionnaire that the management set reasonable goals, which could be achieved, so there is no pressure on the employees/managers to misstate the financial reports in order to get bonuses (incentive).

Presence of Board of Directors, Audit committee, Board’s compliance with the SEC’s Blue ribbon committee, independent and experienced board members, management’s oversight and audit committee’s annual review’s leaves very less room for opportunity for employee’s to commit any type of fraud and present misstated financial information.

Performance evaluation based on the behavioral criteria, management’s stress on integrity and ethical behavior, employee’s awareness of the consequences of failing to fulfill their responsibilities are few of the major points which leave employees with no rational explanation for their misconduct. So, in case of Dickinson Technologies, I would say that the employees are not inclined towards misstating the financial information and thus the risk of fraudulent financial reporting in this case is very low.

B. Misstatement arising from misappropriation of assets:

Control environment, in general, is very likely to prevent misstatements arising form misappropriation of assets.

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