C254 Fraud & Forensic Accounting Question and Answers

America's capital markets are the envy of the world because of their efficiency, liquidity, and resiliency. What role do financial statements play in American capital markets? - **They present a fair picture of the financial position and results of the organization. Why are American financial statements so widely trusted? - **They are prepared with integrity, and there is a system that checks all published statements. True or false: The SEC views auditors of public companies as "unreliable and frequently incompetent." - **False True or false: Financial statements don't need to be as accurate as possible. There is so much that goes into building them that there are bound to be mistakes. - **False In 2002, a landmark piece of legislation was signed into law to protect against and deter fraud, which also created a private sector organization called the PCAOB (Public Committee Accounting Oversight Board) to help. What was this piece of legislation? - **Sarbanes-Oxley Act (SOX) What is the most significant "red flag" or telltale sign of fraud? - **The symptoms, or red flags, cannot be ranked in order of their significance or extent. Motivations for fraud change from case to case, though there tends to be a common theme. What is that common theme? - **to attempt to improve financial information to support high stock price, support a bond or stock offering, & increase stock price