2
ACCT 4235 Exam 2027-2028 with verified || || || || || ||
detailed solutions ||
Securities Exchange Commission (SEC) - ✔✔the independent government
|| || || || || || || ||
entity responsible for protecting investors; maintaining fair, orderly, and
|| || || || || || || || ||
efficient markets; and facilitating capital formation
|| || || || ||
Enron and WorldCom - ✔✔Main impetus for Congress passing the Sarbanes-
|| || || || || || || || || ||
Oxley Corporate Governance Act in 2002
|| || || || ||
Backdating - ✔✔practice where the effective dates on stock options are
|| || || || || || || || || || ||
deliberately changed for the purpose of securing extra compensation for
|| || || || || || || || || ||
management
perceived pressure, perceived opportunity, and the ability to rationalize the
|| || || || || || || || || ||
fraud as acceptable (rationalization) - ✔✔three elements to motivate frauds
|| || || || || || || || || ||
(fraud triangle)
||
-independent audit ||
-board of directors || ||
(both provide final checks) - ✔✔some of the main controls that could eliminate
|| || || || || || || || || || || || ||
perceived opportunity for financial statement fraud
|| || || || ||
,2
1. a booming economy
|| || ||
2. decay of moral values
|| || || ||
3. misplaced incentives
|| ||
4. high analysts' expectations
|| || ||
5. high debt levels
|| || ||
6. focus on accounting rules rather than principles
|| || || || || || ||
7. lack of auditor independence
|| || || ||
8. greed
||
9. educator failures - ✔✔9 elements of the perfect fraud storm
|| || || || || || || || || ||
1. no sufficient ethics training
|| || || ||
2. not teaching students about fraud
|| || || || ||
3. the way we have taught accountants and business students in the past -
|| || || || || || || || || || || || || ||
✔✔three educator failures || ||
Committee of sponsoring organizations (COSO) - ✔✔a private-sector joint
|| || || || || || || || ||
initiative aimed at combatting corporate fraud
|| || || || ||
Questioning mind-set: A disposition to inquiry, with some sense of doubt. || || || || || || || || || ||
Suspension of judgment: Withholding judgment until appropriate evidence is
|| || || || || || || || ||
obtained.
Search for knowledge: A desire to investigate beyond the obvious, with a desire
|| || || || || || || || || || || || ||
to corroborate.
||
, 2
Interpersonal understanding: Recognition that people's motivations and || || || || || || ||
perceptions can lead them to provide biased or misleading information.
|| || || || || || || || ||
Autonomy: The self-direction, moral independence, and conviction to decide
|| || || || || || || || ||
for oneself, rather than accepting the claims of others.
|| || || || || || || ||
Self-esteem: The self-confidence to resist persuasion and to challenge
|| || || || || || || || ||
assumptions or conclusions. - ✔✔characteristics believed necessary to help
|| || || || || || || || ||
auditors detect fraud || ||
"a trickle to a waterfall" - ✔✔the growth process of financial statement fraud is
|| || || || || || || || || || || || || ||
often referred to as
|| || ||
strategic reasoning - ✔✔involves a mental process of anticipating a fraud
|| || || || || || || || || || ||
perpetrator's potential methods of engaging in and concealing a fraud
|| || || || || || || || ||
zero-order reasoning - ✔✔when an auditor and auditee consider only
|| || || || || || || || || ||
conditions that directly affect themselves but not the other party
|| || || || || || || || ||
first-order reasoning - ✔✔the auditor considers conditions that directly affect
|| || || || || || || || || ||
the auditee ||
higher-order reasoning - ✔✔the auditor considers additional layers of
|| || || || || || || || ||
complexity, including how management may anticipate the auditor's behavior
|| || || || || || || ||
game theory - ✔✔seeks to predict behavior based on an individual's best
|| || || || || || || || || || || ||
response given that individual's motivations and beliefs regarding the likely
|| || || || || || || || || ||
behavior of his orher opponent(s).
|| || || ||
ACCT 4235 Exam 2027-2028 with verified || || || || || ||
detailed solutions ||
Securities Exchange Commission (SEC) - ✔✔the independent government
|| || || || || || || ||
entity responsible for protecting investors; maintaining fair, orderly, and
|| || || || || || || || ||
efficient markets; and facilitating capital formation
|| || || || ||
Enron and WorldCom - ✔✔Main impetus for Congress passing the Sarbanes-
|| || || || || || || || || ||
Oxley Corporate Governance Act in 2002
|| || || || ||
Backdating - ✔✔practice where the effective dates on stock options are
|| || || || || || || || || || ||
deliberately changed for the purpose of securing extra compensation for
|| || || || || || || || || ||
management
perceived pressure, perceived opportunity, and the ability to rationalize the
|| || || || || || || || || ||
fraud as acceptable (rationalization) - ✔✔three elements to motivate frauds
|| || || || || || || || || ||
(fraud triangle)
||
-independent audit ||
-board of directors || ||
(both provide final checks) - ✔✔some of the main controls that could eliminate
|| || || || || || || || || || || || ||
perceived opportunity for financial statement fraud
|| || || || ||
,2
1. a booming economy
|| || ||
2. decay of moral values
|| || || ||
3. misplaced incentives
|| ||
4. high analysts' expectations
|| || ||
5. high debt levels
|| || ||
6. focus on accounting rules rather than principles
|| || || || || || ||
7. lack of auditor independence
|| || || ||
8. greed
||
9. educator failures - ✔✔9 elements of the perfect fraud storm
|| || || || || || || || || ||
1. no sufficient ethics training
|| || || ||
2. not teaching students about fraud
|| || || || ||
3. the way we have taught accountants and business students in the past -
|| || || || || || || || || || || || || ||
✔✔three educator failures || ||
Committee of sponsoring organizations (COSO) - ✔✔a private-sector joint
|| || || || || || || || ||
initiative aimed at combatting corporate fraud
|| || || || ||
Questioning mind-set: A disposition to inquiry, with some sense of doubt. || || || || || || || || || ||
Suspension of judgment: Withholding judgment until appropriate evidence is
|| || || || || || || || ||
obtained.
Search for knowledge: A desire to investigate beyond the obvious, with a desire
|| || || || || || || || || || || || ||
to corroborate.
||
, 2
Interpersonal understanding: Recognition that people's motivations and || || || || || || ||
perceptions can lead them to provide biased or misleading information.
|| || || || || || || || ||
Autonomy: The self-direction, moral independence, and conviction to decide
|| || || || || || || || ||
for oneself, rather than accepting the claims of others.
|| || || || || || || ||
Self-esteem: The self-confidence to resist persuasion and to challenge
|| || || || || || || || ||
assumptions or conclusions. - ✔✔characteristics believed necessary to help
|| || || || || || || || ||
auditors detect fraud || ||
"a trickle to a waterfall" - ✔✔the growth process of financial statement fraud is
|| || || || || || || || || || || || || ||
often referred to as
|| || ||
strategic reasoning - ✔✔involves a mental process of anticipating a fraud
|| || || || || || || || || || ||
perpetrator's potential methods of engaging in and concealing a fraud
|| || || || || || || || ||
zero-order reasoning - ✔✔when an auditor and auditee consider only
|| || || || || || || || || ||
conditions that directly affect themselves but not the other party
|| || || || || || || || ||
first-order reasoning - ✔✔the auditor considers conditions that directly affect
|| || || || || || || || || ||
the auditee ||
higher-order reasoning - ✔✔the auditor considers additional layers of
|| || || || || || || || ||
complexity, including how management may anticipate the auditor's behavior
|| || || || || || || ||
game theory - ✔✔seeks to predict behavior based on an individual's best
|| || || || || || || || || || || ||
response given that individual's motivations and beliefs regarding the likely
|| || || || || || || || || ||
behavior of his orher opponent(s).
|| || || ||
