Chpt_7_outline_-_fraud_and_EM

Chpt_7_outline_-_fraud_and_EM - Incentive to show growth...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 5 Internal controls – why are they important? Sarbox – o Increases responsibility and accountability of CEO’s and directors Section 302: Section 404: o Increases white-collar crime penalties o Auditors and consulting What does this do to the accounting profession? Exposure Exposure – risks borne by the company due to weak internal controls Sources of exposure Active and deliberate threats Passive and unintentional threats Fraud -
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Two types of fraud: 1. Misappropriation of assets Misuse of company resources for personal gain Theft or embezzlement of assets 2. Fraudulent financial reporting Most common methods:
Background image of page 2
How does misstating the financial statements provide a benefit to managers? Earnings Management What is earnings management? Firms manage earnings when there are: 1. Stock market motivations Incentive to MBE Incentive to not report a loss
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Incentive to show growth Incentive to smooth earnings 2. Contractual obligations 3. Debt-related issues The consequences of managing earnings are: Personal benefits to managers Corporate benefits Ways to manage earnings: Places where earnings are managed: What is the difference between fraud and earnings management? Source: Dechow and Skinner, 2000, Accounting Horizons And now, back to fraud Implementing fraud: Types of fraud: Detecting fraud: The Fraud Triangle how and why fraud occurs Auditors Responsibility to Detect Fraud SAS 99 Auditors must: Reasonable assurance Reporting fraud to upper management Situational Pressures an employee is experiencing financial difficulties Available Opportunities poor internal controls Personal Characteristics personal morals of individual employees...
View Full Document

This note was uploaded on 09/28/2011 for the course ACCT 307 taught by Professor Scrowley during the Spring '08 term at S.F. State.

Page1 / 7

Chpt_7_outline_-_fraud_and_EM - Incentive to show growth...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online