ACFE Prevention of Fraud Questions with Right Answers

Detecting illegal acts - The Private Securities Litigation Reform Act (PSLRA), passed in 1995, sets forth several responsibilities for independent auditors of public companies. One of the requirements is that each audit of the financial statements of a public company includes procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts. AU-C Section 240 - -establish standards for auditors in fulfilling their responsibilities related to fraud during a financial statement audit - requires auditors to hold a brainstorming session to discuss the potential for material misstatements due to fraud Public Company Accounting Oversight Board Auditing Standard 2201 - Performing an audit of an entity's internal controls over financial reporting G20/OECD Principles of Corporate Governance - required to be implemented by all corporations in the jurisdictions that have officially adopted the Principles. Corporate governance - refers to the oversight responsibilities of different parties for an organization's direction, operations, and performance. Purpose of corporate governance - Encourage the efficient use of resources and require accountability for the stewardship of those resources. Audit committee - Sarbanes-Oxley Act- responsible for establishing procedures to handle complaints regarding irregularities in a publicly traded company's accounting methods, internal controls, or auditing matters Shareholders - the owners of corporations; they are primarily concerned with maximizing the return on their investment Responsible for holding the board of directors accountable for proper governance and oversight G20/OECD Principles of Corporate Governance - provides guidance for policymakers in evaluating and improving the legal, regulatory, and institutional framework for corporate governance. Board of directors - responsible for overseeing business operations by assessing the strategy and underlying purpose of management's decisions and actions