C254 fraud and forensic Accounting
study Guide
Section 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.
study Guide
Section 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.
