acc562 week 7 discussion 2

acc562 week 7 discussion 2 - example the intentional...

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Case 7B - Madoff Securities  Based on your analysis of the “ For example, the intentional manipulation of reported financial results to misstate the economic picture of the firm is called financial reporting fraud case, respond to each of the discussion points: Discuss the difference between a fraud “condition” and a “fraud risk factor” and provide examples of each. Suppose that a large investment firm had approximately 10% of its total assets invested in funds managed by Madoff Securities. What audit procedures should the investment firm’s independent auditors have applied to those assets? Recommend other financial reporting and auditing-related reforms that would likely be effective in preventing and detecting frauds similar to that perpetrated by Madoff. Discuss the difference between a fraud “condition” and a “fraud risk factor” and provide examples of each. According to appendix to No. 99: Fraud risk factors , there are two types of fraud risk factors: (a) risk factors relating to misstatements arising from fraudulent financial reporting and (b) risk factors relating to misstatements arising from misappropriation of assets. For each of these types of fraud, the risk factors are further classified based on the three conditions generally present when material misstatements due to fraud occur: (a) incentives/pressures, (b) opportunities, and (c) attitudes/rationalizations. Thus, fraud risk factors existed on various fraud conditions.
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