ACCOUNTING AC-405Chapter 3 Discussion2. Some argue against corporate involvement in socially responsible behavior because the costs incurred by such behavior place the organization at a disadvantage in a competitive market. Discuss the merits and flaws of this argument.4. When a company has a strong internal control structure, stockholders can expect the elimination of fraud. Comment on
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ACCOUNTING AC-405Chapter 3 Discussion
2. Some argue against corporate involvement in socially responsible behavior because the costs incurred by such behavior place the organization at a disadvantage in a competitive market. Discuss the merits and flaws of this argument.
4. When a company has a strong internal control structure, stockholders can expect the elimination of fraud. Comment on the soundness of this statement.
6. The estimates of losses annually resulting from computer fraud vary widely. Why do you think obtaining a good estimate of this figure is difficult?
8. Discuss the concept of exposure and explain why firms may tolerate some exposure.
10. Discuss the non-accounting services that external auditors are no longer permitted to render to audit clients.
12. An organization’s internal audit department is usually considered an effective control mechanism for evaluating the organization’s internal control structure. The Birch Company’s internal auditing function reports directly to the controller. Comment on the effectiveness of this organizational structure.
14. Explain the five conditions necessary for an act to be considered fraudulent.
a. Intent – when one knowingly deceives or knows that someone’s statement is false
b. False representation – There must be a false statement of a nondisclosure
c. Material fact – A fact must be a substantial factor in inducing someone to act
d. Justifiable reliance – The misrepresentation must have been a substantial factor on which the injured party relied
e. Injury or loss – The deception must have caused injury or loss to the victim of the fraud
16. Explain the characteristics of management fraud.
a. The fraud is perpetrated at levels of management above the one to which internal control structures generally relate
b. The fraud frequently involves using the financial statements to create an illusion that an entity is healthier and more prosperous than, in fact, it is
c. If the fraud involves misappropriation of assets, it frequently is shrouded in a maze of complex business transactions, often involving related third parties
18. Give two examples of employee fraud, and explain how the thefts might occur.
a. conceal later.
20. Distinguish between skimming and cash larceny.
22. Why are the computer ethics issues of privacy, security, and property ownership of interest to accountants?
24. Explain why collusion between employees and management in the commission of a fraud is difficult to both prevent and detect.
26. Explain the problems associated with lack of auditor independence.
28. Explain the problems associated with questionable executive compensation schemes.
30. Explain the purpose of the Public Company Accounting Oversight Board.
32. What are the key points of the “Issuer and Management Disclosure” of the Sarbanes-Oxley Act?
.
34. What are the classes of transcription errors?
36. Does a hash total need to be based on a financial data field? Explain.
1.
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