Errors and fraud are types of misstatements that can be found in the financial statements of a company. Question 8 options: a) True b) False
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8.
Errors and fraud are types of misstatements that can be found in the financial statements of a company.
Question 8 options:
| a) True | |
|
b) False
|
Step by step
Solved in 2 steps
- Question 1 (i) Which of the following will NOT be a likely ground to blow the whistle?A. When there are serious breaches of company rules and regulationsB. When somebody feels personally aggrievedC. When there are threats to human safetyD. When there are serious concerns about a possible fraud (ii) Which of the following is not an example of internal control risk?A. Risks of errors or fraud in accounting systems and accounting and finance activities.B. Risks that important laws and regulations will not be complied with properly.C. Risks that arise in the business environment and markets in which the company operatesD. The risk of losses resulting from inadequate or failed internal processes, people and systems or external events. (iii) Which of the following is NOT a statutory duty of a director?A. Duty to disclose any money received in connection of a transfer of company property.B. Duty to exercise due diligence in their work C. Duty to contribute an appropriate sum of money to the…23. Management fraud occurs when the top executives of a company deliberately deceive stockholders, creditors, and the auditors by misstating the financial statementsSelect one:TrueFalseQ11 Which of the following best describes the reason why independent auditors report on financial statements? a. management fraud may exist and it is more likely to be detected by independent auditors. b. Different interests may exist between the company preparing the statements and the persons using the statements. c. A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work. d. Poorly designed internal control may be in existence.
- Please answer all 3 subparts Question 1 (i) Which of the following is not an example of internal control risk?A. Risks of errors or fraud in accounting systems and accounting and finance activities.B. Risks that important laws and regulations will not be complied with properly.C. Risks that arise in the business environment and markets in which the company operatesD. The risk of losses resulting from inadequate or failed internal processes, people and systems or external events. (ii) Which of the following is NOT a statutory duty of a director?A. Duty to disclose any money received in connection of a transfer of company property.B. Duty to exercise due diligence in their work C. Duty to contribute an appropriate sum of money to the board on joining the companyD. Duty to keep proper accounting records and make such records available for inspection. (iii) Which of the following would be the best way for a shareholder (not being an institutional shareholder) to become involved in the…(2) Is it permissible to violate generally accepted accounting principles (GAAP) when preparing reports used strictly by company management? If so, why?2 The Sarbanes-Oxley Act (SOX) requires top management of companies to sign a report certifying that the financial statements are free of error. True or False
- LO 8 A review of business failures as described in the financial press, such as the Wall Street Journal, suggests that the control environment is one of the major contributors to the failure. Often the tone at the top at the failed companies reflects a disdain for controls and an emphasis on accomplishing specific financial reporting objectives such as reporting increased profitability. How will the auditor’s assessment of the operating effectiveness of the control environment affect the design and conduct of an audit? Consider both a positive and negative assessment.C. Give an example and explain securities fraud in violation of the Securities Act of ‘33. D. Explain how Enron “cooked the books” with two of its accounting practices26-is an act of willfully making misrepresentation of financial information by one or more individuals among management, TCWG, Employee to mislead others O a. Fraud O b. None of the options O c. Mistake O d. Illegal act
- Below are several statements about the Sarbanes-Oxley Act (SOX).1. SOX represents legislation passed in response to several accounting scandals in the early 2000s.2. The requirements outlined in SOX apply only to those companies expected to have weak internal controls or to have manipulated financial statements in the past.3. Section 404 of SOX requires both company management and auditors to document and assess the effectiveness of a company’s internal control processes that could affect financial reporting.4. Severe financial penalties and the possibility of imprisonment are consequences of fraudulent misstatement.5. With the establishment of SOX, management now has primary responsibility for hiring an external audit firm.6. The lead auditor in charge of auditing a particular company must rotate off that company only when occupational fraud is suspected.Required:State whether the answer to each of the statements is true or false.Question 8 organizations use the GAAP framework of internal control as a benchmark when assessing the effectiveness of internal control over financial reporting. True False14. Paul Schmidt, a representative for Westby Investments, is explaining how security analysts use the results of the accounting process. He states, "Analysts do not have access to all the entries that went into creating a company's financial statements. If the analyst carefully reviews the auditor's report for any instances where the financial statements deviate from the appropriate accounting principles, he can then be confident that management is not manipulating earnings." Schmidt is: correct. incorrect, because the entries that went into creating a company's financial statements are publicly available. incorrect, because management can manipulate earnings even within the confines of generally accepted accounting principles.