Fraud Examination
5th Edition
ISBN: 9781305079144
Author: W. Steve Albrecht, Chad O. Albrecht, Conan C. Albrecht, Mark F. Zimbelman
Publisher: Cengage Learning
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1. Under the Statute of Frauds, the following contracts must be in writing, otherwise they cannot be enforced in court litigation except
CHOICES:
Sale of personal property at a price not more than P300.00
Sale of real property regardless of the price involved
Sale of property not to be performed within a year from the date thereof regardless of the nature of the property and price involved
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The Sarbanes-Oxley Act (SOX) contains all of the following titles that have a direct impact on forensic accounting and fraud except:
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Title 4 prohibits personal loans and requires certain financial disclosures.
Title 11 provides a possible 25-year prison sentence for anyone altering, destroying, mutilating, or concealing a record, document, or other object (or otherwise impeding) for an official proceeding.
Title 9 increases maximum prison sentences for mail and wire fraud from 5 to 20 years. Willfully and knowingly certifying financial reports not in compliance with the Act is now a criminal offense.
Title 4 prohibits personal loans and requires certain financial disclosures.
Rule 10(b)-5 Liability under the Securities Exchange Act of 1934. Gordon & Groton(G&G), CPAs, were auditors of Bank & Company, a brokerage firm and member of anational stock exchange. G&G examined and reported on the financial statements of Bank,which were filed with the Securities and Exchange Commission.
Several of Bank’s customers were swindled by a fraudulent scheme perpetrated by Bank’spresident, who owned 90 percent of the voting stock of the company. The facts establish thatG&G failed to perform the audit with the appropriate level of professional care but neitherparticipated in the fraudulent scheme nor knew of its existence.The customers are suing G&G under the antifraud provisions of section 10(b) and Rule10b-5 of the Securities Exchange Act of 1934 for aiding and abetting the president’s fraudulent scheme. The customers’ suit for fraud is predicated exclusively on G&G’s failure toconduct a proper audit, thereby failing to discover the fraudulent…
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- 3. John is president and sole shareholder of Photo, Inc. Photo, Inc. wishes to borrow money, but to do so, the bank requires John to orally guarantee to repay the loan if Photo, Inc. cannot. Examine the validity of John’s oral guarantee.arrow_forwardRefer to the Focus on Fraud feature “Moss Adams and the Meridian Mortgage Funds Fraud.” a. Why was Moss Adams sued by the trustee for the bankrupt Meridian Mortgage? b. What would the trustee have to prove in order for the courts to hold Moss Adams liable for damages?arrow_forwardLO 3 An auditor was sued and found guilty of negligence. For each of the following situations, indicate the likelihood the plaintiff would win if the plaintiff is: A financial institution that the auditor knew was the primary beneficiary of the audit, suing under common law. A stockholder suing under common law. A financial institution that was unknown to the auditor loaned money to the client based on the audit financial statements, but the auditor knew only that the client would use the statements to obtain a loan from some financial institution. The plaintiff is suing under common law. An investor suing under the 1934 Securities Exchange Act. An investor suing under the 1933 Securities Act.arrow_forward
- 13. Gingerbread Corp was under a pending lawsuit by a customer suing for having slipped on a puddle of water from a leaky pipe in March of 2020. The lawsuit is considered to be probable to favor the customer and can reasonably estimated for $5,000. What is the correct entry to be recorded on December 31, 2020? a.DR Legal receivable 5,000 CR Legal expense 5,000 b.DR Legal expense 5,000 CR Cash 5,000 c.The lawsuit has not been resolved and therefor would not appear on the company financial statements d.DR Legal expense 5,000 CR Legal liability 5,000arrow_forwardQuestion 4: Case Study The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto (complete) dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron was attributed as the biggest audit failure. Enron's auditor firm, Arthur Andersen, was accused of applying reckless standards in its audits because of a conflict of interest over the significant consulting fees generated by Enron. During 2000, Arthur Andersen earned $25 million in audit fees and $27 million in consulting fees from Enron. Enron hired numerous Certified Public Accountants as well as accountants who had worked on developing accounting rules with the Financial Accounting Standards Board. The accountants searched for new ways to save the company money,…arrow_forwardIdentify one (1) real-life ‘financial reporting accounting fraud’ that occurred post 1990 (i.e. in the last 30 years), in any country, and answer the following questions: a) Discuss what specific accounting regulations were violated?arrow_forward
- 1. Key filed a fraudulent income tax return for the year 2021 on April 11, 2022. The BIR discovered the fraud on February 20, 2023. The last day for the BIR to collect or to send an assessment notice is a. 4/15/2032 b. 4/11/2025 c. 2/20/2033 d. 4/15/2025arrow_forward#10 Issue: Sunrise Pools, Inc., is being sued by the Crescent Club for negligence when installing a new pool on Crescent Club’s property. Crescent Club alleges that the employees of Sunrise Pools damaged the foundation of the clubhouse and part of the golf course while operating heavy machinery to install the pool. The lawsuit is for $1.5 million. At the time of the alleged incident, Sunrise Pools carried only $600,000 of liability insurance. While reviewing the draft of Sunrise Pools’ annual report, its president deletes all references to this lawsuit. She is concerned that disclosure of this lawsuit in the annual report will be viewed by Crescent Club as admission of Sunrise’s wrongdoing, even though she privately admits that Sunrise employees were careless and believes that Sunrise Pools will be found liable for an amount in excess of $1 million. The president sends the amended draft of the annual report to the vice president of finance with a note stating that the lawsuit will…arrow_forward19. On December 23, Wyman, a lawyer representing First National Bank & Trust (defendant), wrote to Zeller (plaintiff) stating that he had been instructed to offer a building to Zeller for sale at a price of $240,000. Zeller had previously expressed an interest in purchasing the building for $240,000. The letter also set forth details concerning interest rates and loan fees. After receiving the letter, Zeller instructed his attor- ney, Jamma, to send Wyman a written counteroffer of $230,000 with interest and loan arrangements varying from the terms of the original offer. Jamma sent the written counteroffer as instructed on January 10. On the same day, Jamma telephoned Wyman and informed him of the counteroffer. Subsequently Jamma sent an acceptance of the original offer to Wyman. When Wyman refused to sell the property to him, Zeller brought an action to seek enforcement of the alleged contract. Decision?arrow_forward
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