MGMT 642 Chapter 11

  1. unlike other types of fraud, financial statement fraud is usually not concealed andtherefore relatively easy to spot
  2. fraud indicators, or red flags, can be caused by fraud or legitimate, non-fraud factors
  3. without a confession, forged documents, of repeated fraudulent acts that establish a pattern of dishonesty, convicting someone of fraud is often difficult
  4. according to the 1999 COSO study of fraudulent financial reporting, themost common method used to perpetrate financial statement fraud includes overstating liabilities
  5. according to the 1999 COSO study, most companies that committed financial statement fraud had no audit committee or had an audit committee that met less than 2x a year
  6. Michael "mickey" monus and Patrick Finn of Phar-Mor used 3 methods of income statement fraud: account manipulation, overstmt of inventory and accounting rules and manipulations
  7. in identifying mgmt fraud exposures it is useful to think of the fraud exposure triangle including (1) mgmt and directors, (2) orgs and industry, (3) relationships with others.
  8. financial stmt fraud is usually committed by entry-level accountants agains the org
  9. in searching for FS fraud, the 3 aspects of directors and members if teh mgmt that should be known are (1)their backgrounds, (2) motivations, (3) influence in making decisions for the org.
  10. an org's relationship with other orgs and individuals is of no interest to a fraud examiner
  11. recording fictitious revenues is one of the most common ways of perpetrating FS fraud
  12. most often, the controller or CFO of a corp os the perp of FS fraud bc of his or her knowledge of accounting and unlimited access to accounts
  13. FS fraud like other types of fraud is most often committed against an org instead of on behalf of the org
  14. most people who commit mgmt fraud are repeat offenders
  15. most FS frauds occur in large, historically profitable orgs
  16. Zero order strategic reasoning takes into account teh potential actions of others before one decides to act
  17. backdating is a method of dating stock options so that stock option holders can maximize their payouts
  18. identifying fraud exposures is one of the most difficult steps in detecting FS fraud
  19. higher order reasoning is the most challenging of the types of strategic reasoning, but can potentially be the most effective in detecting FS fraud
  20. FS fraud is usually committed by:
    e. both a and b (execs and managers)
  21. which officer os a company is most likely to be the perp of FS fraud?
    d. CEO
  22. when looking for FS fraud, auditors should look for indicators of fraud by:
    e. all of the above
  23. teh 3 aspects of mgmt that a fraud examiner needs to be aware of include all of the following except:
    c. their religious convictions
  24. Which of the following is least likely to be considered a financial reporting fraud symptom , or red flags?
    d. size of the firm
  25. many indicators of fraud are circumstantial; that is, they can be caused by nonfraud factors. This fact can make convicting someone of fraud difficult. Which of the following types of evidence would be most helpful in proving that someone committed fraud?
    d. a repeated pattern of fraudulent acts
  26. in the Phar-Mor fraud case, several different methods were used for manipulating teh FS. these included all of the following except:
    a. funneling losses into unaudited subsidiaries
  27. most FS frauds occur in smaller orgs with simple mgmt structures, rather than in large, historically profitable orgs. this is because:
    c. mgmt fraud is more difficult to commit when there is more formal org structure of mgmt
  28. mgmt fraud is usually committed on behalf of teh org rather than against it. Which of the following would not be a motivation of fraud on behalf of an org?
    a. a CEO needs a new car
  29. all of the following are indicators of FS fraud except:
    d. large amounts of available cash
  30. During an audit, an auditor considers the conditions of the auditee and plans the audit accordingly. This is an example of which of the following?
    c. first-order reasoning
  31. in teh context of strategic reasoning, if an auditor only followos the established audit plan and does not consider other factors relating to the auditee, then this is an example of which of the following?
    a. zero-order reasoning
  32. in recent years, many SEC investigations have taken place on the improper issuance of stock options to corporate execs. These practices increase exec compensation at the expense of shareholders. This practice is known as:
    b. backdating stock options
Card Set
MGMT 642 Chapter 11