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C254 fraud and forensic Accounting study Guide.
C254 fraud and forensic Accounting study Guide.
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C254 fraud and forensic Accounting study GuideSection 404 of the Sarbanes-Oxley Act of 2002, provided for increased scrutiny over which area of corporate governance: - Internal controls design, implementation and effectiveness.
Section 404 of SOX is probably the most well-known section of Sarbanes-Oxley that requires management to select an internal control framework and then assess the effectiveness and report annually on both the design and operational effectiveness of that framework.
The five COSO framework areas - The five COSO framework areas are Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring.
The impact of Sarbanes-Oxley on the accounting and auditing profession was: - Significant because of the creation of the PCAOB and its responsibilities provided oversight and regulation for the profession.
The creation of the PCAOB and its responsibilities by the SOX act provided oversight and regulation for the accounting and auditing profession for the first time in over 100 years.
The corporate governance fabric - The corporate governance fabric is generally thought to include: board of directors, audit committee, senior / executive management, internal audit, external (independent) audit and regulators and governing bodies.
What is not believed to improve auditor independence - Requiring audit firm lead partner rotation every seven years instead of five.
SOX requires audit firm lead partner rotation every five years instead of seven.
The impetus for the Sarbanes-Oxley Act of 2002 was - The numerous and costly financial reporting frauds of the early 2000s such as WorldCom, Tyco, Adelphia, Enron and other paved the way for passage of the SOX Act of 2002.
Beyond internal controls design, implementation and effectiveness assessments, the Sarbanes Oxley act provided for - Section 302 of SOX requires that the company's "principal officers" (typically the Chief Executive Officer and Chief Financial Officer) certify and approve the integrity of their company financial reports. Control activities include: - Adequate segregation of duties, proper procedures for authorization, and adequate documents and records are all considered to be control activities. For more information, see topic 9.
Autocratic Management - occurs when supervisors and managers do not listen to, or have a receptive attitude towards their subordinates' input or suggestions.
Fraud Triangle - Opportunity, Rationalization, Pressure
or Opportunity, Attitude, Incentive
Control Activities - The five types of control activities are segregation of duties, system of authorizations, physical controls, independent checks and documents and records.
Control Environment - ex. Good Hiring practices
Which organization developed the internal control framework that most organizations use? - COSO
Segregation of Duties - Segregation of duties means that incompatible or high risk duties are separated between two or more people. Independent checks involves someone checking on someone else's work; a system of authorizations usually implies dollar limits or events that individuals can participate in or authorize and physical safeguards involves safes, locks, key, fences, etc.
Which of the following elements is not included in the ad hoc approach to dealing with fraud but is included in the pro-active approach to dealing with fraud incidents?
Implementation of controls to remedy or fix the problem
Inconsistent resolution
Ad hoc investigation
All of the above are included in the ad hoc approach to dealing with fraud - Implementation of controls to remedy or fix the problem.
Because fraud is a crisis for companies that follow the ad hoc approach to dealing with fraud, they rarely, if ever, pro-actively assess what they can learn from the fraud incident or put controls in place to prevent the problem from occurring again.
Disclosure fraud categories - 1). Overall misrepresentations about the nature of the company or its products
2). Misrepresentation in management discussion and other non financial statements
3). Misrepresentations in the footnotes to the financial statements.
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