Accounting I 2036 Chapter 5 Practice Test Questions All Answered Correct Updated.

Types of employee Fraud - Answer corruption, asset misappropriation, financial statement fraud fraud triangle - Answer opportunity, incentive, rationalization Sarbanes-Oxley Act (SOX) purpose - Answer to reduce fraud amongst public companies Requirements and Goals of SOX - Answer counteract incentives, reduce opportunities, encourage honesty counteract incentives - Answer those who willfully misrepresent financial results face stiff penalties, including fines of up to $5 million plus repayment of any fraud proceeds. Also, maximum jail sentences have been increased to 20 years, which can quickly add up because federal sentencing guidelines allow judges to declare consecutive jail terms for each violation. The VP at Koss was charged with six counts of fraud, so she was facing a maximum prison term of 120 years reduce opportunities - Answer SOX REQUIRES all public companies to establish an audit committee of independent directors, and to evaluate and report on the effectiveness of internal control over financial reporting. The report must be completed by management and, for large public companies, by external auditors as well encourage honesty defintion - Answer public companies must have tip lines that allow employees to secretly submit concerns about questionable accounting or auditing practices. SOX grants legal protection to whistle blowers Internal Control - Answer consists of the actions taken by people at every level of an organization to achieve its objectives relating to... internal control objectives - Answer operations, reporting, compliance internal control - operations - Answer operational objectives focus on completing work efficiently and effectively and protecting assets by reducing the risk of fraud