a.
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:Whether or not the members’ description is sufficient to assess their qualification. Also, explain whether or not the number of meetings is sufficient to fulfill their responsibilities. Also, explain the additional information that might be required and the manner to obtain that information.
b.
Introduction: Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
The audit committee financial expert and whether the individual will truly be able to fulfill the assigned role. Also, state the reason that audit committee member shall have financial expertise.
c.
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:Whether or not the compensation received by the members were adequate.
d.
Introduction:Audit committee is a sub-committee of board of directors which is responsible for providing an oversight to the financial reporting process. Audit committee acts as an intermediary between external auditors of the company and the management to resolve areas of conflict amongst them.
To explain:The weaknesses in the audit committee governance structure.
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Chapter 2 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
- Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?arrow_forwardThe Sarbanes-Oxley Act a. created the Private Company Accounting Board. b. allows accountants to audit and to perform any type of consulting work for a public company. c. stipulates that violators of the act may serve 20 years in prison for securities fraud. d. requires that an outside auditor must evaluate a public company’s internal controls.arrow_forward42-Mr. X is an auditor of XYZ Company. During the course of audit, he found that Mr. Y who was one of the executive directors of the company raised OMR 15,000 from the debenture holder which was beyond his authority. On confirming, he replied by e-mail that it was later approved by board. Can the e-mail received from executive director be considered as valid audit document? O a. Unable to decide as the information is not sufficient O b. No, it cannot be considered as valid audit document O c. Only the evidence received in hard form is valid o d. Yes, it can be considered as valid audit documentarrow_forward
- In the Why It Matters feature “Examples of Theft and FinancialReporting Frauds” at the beginning of the chapter, we introduced youto the Koss Corporation fraud. In this problem, we provide you withfurther details about that fraud. During the fall of 2009, Koss Corporation,a Wisconsin-based manufacturer of stereo headphone equipment,revealed that its vice president of finance (Sujata “Sue” Sachdeva) haddefrauded the company of approximately $31 million over a periodof at least five years. Grant Thornton LLP was the company’s auditor,and the firm issued unqualified audit opinions for the entire period in which they worked for Koss. According to reports, Sachdeva’s theftaccelerated over a period of years as follows:FY 2005 $2,195,477FY 2006 $2,227,669FY 2007 $3,160,310FY 2008 $5,040,968FY 2009 $8,485,937Q1 FY 2010 $5,326,305Q2 FY 2010 $4,917,005To give you a sense of the magnitude of the fraud, annual revenuesfor Koss Corporation are in the range of $40 to $45 million…arrow_forwardOne writer recently noted that 99.4 percent of all companies prepare statements that are in accordance with GAAP. Why then is there such concern about fraudulent financial reporting?arrow_forwardThe Sarbanes-Oxley Act Created the Private Company Accounting Board. Allows accountants to audit and to perform any type of consulting work for a public company. Stipulates that violators of the act may serve 20 years in prison for securities fraud. Requires that an outside auditor must evaluate a public company’s internal controls.arrow_forward
- §301 of SOX requires corporate audit committees to: O take vacations annually. O have a majority of members who are CPAs. set up hotlines so employees can leave tips about fraud. Ohave a code of ethics.arrow_forwardWhich of the following statements is true of the Sarbanes−Oxley Act? A. All private and foreign companies must issue an internal control report evaluated by an outside auditor. B. Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. C. Those who commit securities fraud must be sentenced to 10 years in prison. D. The Public Company Accounting Oversight Board oversees the work of auditors of public companies.arrow_forward
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