Ethical Considerations

Question 1

Pressure Component

Answer 1

why individual commits fraud

Question 2

Opportunity Component of Fraud Triangle

Answer 2

Could individual commit fraud and get away with it?

Question 3

Rationalization of Fraud Triangle

Answer 3

Individual’s justification for committing fraud

Question 4

TRUE/FALSE: If all three components in Fraud Triangle exist, fraud is certain to occur

Answer 4

False. There is a higher risk it will occur.

Question 5

What strengthens a firm’s control environment to reduce fraud?

Answer 5

1. internal auditors have access to committee of board of directors
2. audit committee is active in overseeing financial statement reporting policies
3. firm’s accounting policies are in compliance with policies set by 3rd parties such as SEC & FASB

Question 6

Moral issues

Answer 6

Firm’s actions in face of societal expectations

individual’s beliefs, concerns and behaviour concerning their job

Question 7

What are accounting provisions of Foreign Corrupt Practices Act of 1977?

Answer 7

• Required to make and keep books, records, and accounts that properly reflect transactions and disposition of assets.
• Required to devise and maintain a system of internal control sufficient to ensure management’s control, authority, and responsibility over assets.

Question 8

Which is a provision in the anti-bribery section of the Foreign Corrupt Practices Act of 1977?

Answer 8

No concern (entity) or person may offer or authorize corrupt payments to any foreign official, foreign political party, or official thereof, or candidate for political office in a foreign country.

Question 9

Ethical Issues

Answer 9

Society’s expectations of how a firm should operate and code of conduct

Question 10

List aspects of misappropriation of assets

Answer 10

1. employees commonly commit this fraud
2. cause material misstatements of FS; cause internal problems
3. mgmt’s responsible for establishing and maintaining internal controls to mitigate this fraud

Question 11

Definition: Credibility Standard

Answer 11

1. communicate info fairly & objectively
2. disclose all relevant info that could be expected to influence a user’s understanding of info
3. disclose any delays or deficiencies that could result in breaking a policy or law
4. recognize & communicate professional limits and other constraints that can impact performance