MindTap Accounting, 1 term (6 months) Printed Access Card for Johnstone/Gramling/Rittenberg's Auditing: A Risk Based-Approach, 11th
11th Edition
ISBN: 9781337619509
Author: JOHNSTONE, Karla M; Gramling, Audrey A.; Rittenberg, Larry E.
Publisher: Cengage Learning
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Question
Chapter 2, Problem 25RQSC
To determine
Introduction: Corporate governance refers to keeping an oversight over the organizations operations and financial reporting. Corporate governance ensures that operations are in accordance with organizations objectives and meet the stakeholders’ needs.
To explain: Whether or not the factors describing the audit clients, indicate poor corporate governance. Also, explain the associated risks.
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The following factors describe a potential audit client. For each factor, indicate whether it is indicative of poor corporate governance. Explain the reasoning for your assessment. Finally, determine the risks to reliable financial reporting that are associated with each factor.
a.The company is in the financial services sector and has a large number of consumer loans, including mortgages, outstanding.
b.The CEO’s and CFO’s compensation is based on three components: (a) base salary, (b) bonus based on growth in assets and profits, and (c) significant stock options.
c.The company has an internal auditor who reports directly to the CFO and makes an annual report to the audit committee.
Problem 1
For each situation, indicate whether it is indicative of poor corporate
governance. Explain the reasoning for your assessment.
a.
The company is in the financial services sector and has a large number of
consumer loans, including mortgages, outstanding.
b. The CEO's and CFO's compensation is based on three components: (a)
assets and profits, and (c)
base salary, (b) bonus based on growth
significant stock options.
c. The audit committee meets semiannually. It is chaired by a retired CFO
who knows the company well because she had served as the CFO of a
division of the firm. The other two members are local community
members - one is the president of the Chamber of Commerce and the
other is a retired executive from a successful local manufacturing firm.
d. The company has an internal auditor who reports directly to the CFO and
makes an annual report to the audit committee.
e.
The CEO is a dominating personality - not unusual in this environment.
He has been on the job for six…
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description.
Major Provisions of the Sarbanes-Oxley Act
Descriptions
1. Oversight board
2. Corporate executive accountability
3. Auditor rotation
4. Nonaudit services
5. Internal control
a. Executives must personally certify the company’s financial statements. b. Audit firm cannot provide a variety of other services to its client, such as investment advising. c. PCAOB establishes standards related to the preparation of audited financial reports. d. Lead audit partners are required to change every five years. e. Management must document the effectiveness of procedures that could affect financial reporting.
Chapter 2 Solutions
MindTap Accounting, 1 term (6 months) Printed Access Card for Johnstone/Gramling/Rittenberg's Auditing: A Risk Based-Approach, 11th
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2CYBKCh. 2 - Prob. 3CYBKCh. 2 - Prob. 4CYBKCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 6CYBKCh. 2 - Prob. 7CYBKCh. 2 - Prob. 8CYBKCh. 2 - Prob. 9CYBKCh. 2 - Prob. 10CYBK
Ch. 2 - Prob. 11CYBKCh. 2 - Prob. 12CYBKCh. 2 - Prob. 13CYBKCh. 2 - Prob. 14CYBKCh. 2 - Prob. 15CYBKCh. 2 - Prob. 16CYBKCh. 2 - Prob. 17CYBKCh. 2 - Prob. 18CYBKCh. 2 - Prob. 19CYBKCh. 2 - Prob. 20CYBKCh. 2 - Prob. 21CYBKCh. 2 - Prob. 22CYBKCh. 2 - Prob. 23CYBKCh. 2 - Prob. 24CYBKCh. 2 - Prob. 1RQSCCh. 2 - Prob. 2RQSCCh. 2 - Prob. 3RQSCCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 5RQSCCh. 2 - Prob. 6RQSCCh. 2 - Prob. 7RQSCCh. 2 - Prob. 8RQSCCh. 2 - Prob. 9RQSCCh. 2 - Prob. 10RQSCCh. 2 - Prob. 11RQSCCh. 2 - Prob. 12RQSCCh. 2 - Prob. 13RQSCCh. 2 - Prob. 14RQSCCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 16RQSCCh. 2 - Prob. 17RQSCCh. 2 - Prob. 18RQSCCh. 2 - Prob. 19RQSCCh. 2 - Prob. 20RQSCCh. 2 - Prob. 21RQSCCh. 2 - Prob. 22RQSCCh. 2 - Prob. 23RQSCCh. 2 - Prob. 24RQSCCh. 2 - Prob. 25RQSCCh. 2 - Prob. 26FFCh. 2 - Prob. 27FFCh. 2 - Prob. 28FF
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