EBK AUDITING: A RISK BASED-APPROACH TO
10th Edition
ISBN: 9780100548480
Author: RITTENBERG
Publisher: YUZU
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Textbook Question
Chapter 2, Problem 1TFQ
The Great Salad Oil Swindle of 1963 is an asset misappropriation fraud. (T/F)
Expert Solution & Answer
To determine
Introduction: Asset misappropriation fraud refers to a fraud when any thrid-party or employees of the entity abuses there position for stealing or misusing the assets of the organization. It includes embezzlement of cash, assets stolen, and various other related losses.
To examine: Whether the given statement is true or false.
Answer to Problem 1TFQ
The given statement is “False.”
Explanation of Solution
The given case is an example of fraudulent financial reporting. Here, the organization has overstated its income by increasing the amount of inventory and understating the value of expenses. This also overstated the amount of assets.
Therefore, this statement is false.
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Which of the following items is not true about fraud?a. It can cause injury or damage to another party.b. It is an intentional misrepresentation of facts.c. Its damages must exceed a threshold of $150,000.d. It is designed to persuade another party to act in a way that causes injury or damage tothat party.
Decide for yourself which of the following statements is correct and which is incorrect. The separation of asset recordkeeping from asset custody aids in the reduction of fraud.
The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. Rite Aid retroactively increased the estimated lives (periods of time) over which some groups of assets were depreciated. These retroactive depreciation changes violated GAAP, which requires such changes to be done prospectively. There was no legitimate business purpose or supporting documentation for these changes. The effect of the retroactive depreciation changes resulted in increases to income, and caused some asset groups to have a negative depreciation expense. These changes resulted in an approximately $14.6 million overstatement of FY 1998 pre-tax income.
Chapter 2 Solutions
EBK AUDITING: A RISK BASED-APPROACH TO
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2TFQCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 4TFQCh. 2 - Prob. 5TFQCh. 2 - Prob. 6TFQCh. 2 - Prob. 7TFQCh. 2 - Prob. 8TFQCh. 2 - Prob. 9TFQCh. 2 - Prob. 10TFQ
Ch. 2 - Prob. 11TFQCh. 2 - Prob. 12TFQCh. 2 - Prob. 13MCQCh. 2 - Prob. 14MCQCh. 2 - Prob. 15MCQCh. 2 - Prob. 16MCQCh. 2 - Prob. 17MCQCh. 2 - Prob. 18MCQCh. 2 - Prob. 19MCQCh. 2 - Prob. 20MCQCh. 2 - Prob. 21MCQCh. 2 - Prob. 22MCQCh. 2 - Prob. 23MCQCh. 2 - Prob. 24MCQCh. 2 - Prob. 25RSCQCh. 2 - Prob. 26RSCQCh. 2 - Prob. 27RSCQCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 29RSCQCh. 2 - Prob. 30RSCQCh. 2 - Prob. 31RSCQCh. 2 - Prob. 32RSCQCh. 2 - Prob. 33RSCQCh. 2 - Prob. 34RSCQCh. 2 - Prob. 35RSCQCh. 2 - Prob. 36RSCQCh. 2 - Prob. 37RSCQCh. 2 - Prob. 38RSCQCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 40RSCQCh. 2 - Prob. 41RSCQCh. 2 - Refer to Exhibit 2.5 and answer the following...Ch. 2 - Prob. 43RSCQCh. 2 - Prob. 44RSCQCh. 2 - Prob. 45RSCQCh. 2 - Prob. 46RSCQCh. 2 - Prob. 47RSCQCh. 2 - Prob. 48RSCQCh. 2 - Prob. 49RSCQCh. 2 - Prob. 50FFCh. 2 - Prob. 51FFCh. 2 - Prob. 52FF
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The Foreign Corrupt Practices Act (FC PA) was implemented in 1977. Why was it enacted, and what are its major provisions?arrow_forwardRefer to Exhibit 2.1 a. What is a Ponzi scheme? b. Describe the key elements of the Bernie Madoff fraud. c. Is this fraud primarily a case of asset misappropriation or fraudulent financial reporting?arrow_forwardWhat items could indicate a significant risk of fraud in the acquisition and expenditure cycle (i.e., be red flags)?arrow_forward
- Select the correct answer(s) for the following multiple-choice questions. Note that there may be more than one correct answer. Which of the following statements is (are) true? a. To prevent detection when an asset is stolen, the perpetrator must inflate liabilities or decrease assets. b. Committing a fraud almost always takes more effort and time than concealing it. c. Perpetrators can hide an asset theft by charging the stolen item to an expense account. d. A lapping scheme is used to commit fraud but not to conceal it. e. An individual can hide the theft of cash using a check-kiting scheme.arrow_forwardFraud consists of some deceitful practice or willful device, resorted to with intent to deprive another of his right. Fraud is generally categorized as follows: Asset Misappropriation a) May include employee theft – typically cash, physical assets (computers), or intellectual property. b) May encompass a variety of wrongful acts, such as, among others, bribes or kickbacks. c) Deliberate misrepresentation of the financial statements.arrow_forwardWorldCom committed the largest fraud in U.S. history. What was the primary method WorldCom’s management used to carry out the fraud?arrow_forward
- Do you think the new revenue recognition standard introduced by the FASB-IASB can reduce the likelihood of similar fraud cases caused by improper revenue recognition?arrow_forwardWhat are some red flags that may indicate a cover-up or concealment of a fraud?arrow_forwardHow this audit fraud work exists? What is the reason behind this audit fraud?arrow_forward
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