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Unformatted text preview: ACCT341-E1WW February 1, 2102 Week Five Discussion Questions Assignment 5-3 Chapters 11 & 12 11-2.There are three main groups of people who commit financial statement fraud. Who are they?- Senior management: The SEC named the CEO and/or the CFO for involvement in 89% of financial statement fraud cases. Reasons being (a) to conceal true business performance, (b) to preserve personal status/control, and (c) to maintain personal income/wealth.- Mid- and lower-level employees: This category of employees may falsify financial statements for their area of responsibility to conceal their poor performance or to earn bonuses based on the higher performance.- Organized criminals – This group may use this type of scheme to obtain fraudulent loans from a financial institution , or to hype a stock they are selling as part of a “pump-and- dump” scheme. 11-6. What is meant by the term understatement ?- To defer “surplus” earnings to the next accounting period. If current period budgets have been met and there is no reward for additional performance, corporate managers may prefer to direct additional earnings to the next period to help meet their new targets.- To take all possible write-offs in one “big bath” now so future earnings will be consistently higher....
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 341 taught by Professor Kamradt during the Spring '10 term at Franklin.
- Spring '10