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Unformatted text preview: Stephanie HallHawkins AC410-01 Unit 5 Project 9-56.a. The fraud risk factors are as follows: A lot of the new CEO’s compensation is represented by bonuses and stock options. This may be a motivation for him to engage in fraudulent financial reporting. The CEO’s statement to the stock analysts that SCS's earnings would increase 30% next year may be unrealistic. That forecast may tempt him to intentionally misstate funds this year to increase the profitability of the next year. SCS's audit committee may not be sufficiently objective because the chair of the audit committee hired his best friend to be the new CEO. Management seems to be satisfied with an understaffed and ineffective internal audit department. This situation indicates the wrong attitude regarding internal controls. Management has failed to properly monitor and correct a deficiency in its internal control--the lack of segregation of duties in cash disbursements. Information about anticipated future layoffs has spread among the employees. This Information about anticipated future layoffs has spread among the employees....
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- Spring '10
- Balance Sheet, Financial audit, risk factor