UOP ACC 546 All Assignments NEW

UOP ACC 546 Case 3.3 The Anonymous Caller NEW

UOP ACC 546 Case 3.3 The Anonymous Caller NEW

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ACC 546 Case 3.3 The Anonymous Caller NEW

Case 3.3 The Anonymous Caller, p. 63-65

[1] Do you think situations like this (i.e., aggressive accounting or even financial statement fraud) are common in practice?

[2] Which financial statement assertion related to sales transactions did management violate when it issued the falsified financial statements?

[3] The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) recently completed a joint project to develop a common revenue standard for U.S. GAAP and IFRS to improve revenue recognition practices and to remove inconsistencies and weaknesses in revenue requirements. The updated guidance is contained in the Accounting Standards Codification as Topic 606, Revenue from Contracts with Customers. Review that guidance to summarize the core principle for recognizing revenue and briefly describe the five steps needed to achieve the core principle. Also, describe how the core principle was not achieved in this situation.

[4] What types of audit procedures could an external auditor perform that might help the auditor detect this fraudulent activity?

[5] People who study instances of financial statement fraud often note that three conditions are generally present for fraud to occur. First, the person perpetrating the fraud has an incentive or pressure to engage in fraud. Second, there is an opportunity for that person to carry out the fraud. Third, the person's attitude or ethical values allows the perpetrator to rationalize the unethical behavior. Describe examples of incentive, opportunity, and attitude conditions that were present in this situation.

[6] In 2014, the AICPA's Professional Ethics Executive Committee adopted a revised Code of Professional Conduct that is effective December 15, 2014. Briefly describe how the new Code is structured and indicate where would you find guidance about the importance of integrity.

[7] (a) What would you recommend to the caller if you were Dr. Mitchell? (b) What are the risks of continuing to work with the company? (c) What are the risks of resigning immediately?

[8] What responsibility, if any, does the caller have to report this situation directly to the bank involved? Before you respond, think about the risks present if the caller does inform the bank and it later turns out that the caller's assessment of the situation was inaccurate, i.e., there was no fraud.

[9] (a) What other parties, if any, should be notified in addition to the bank? (b) What concerns do you have about notifying the external auditors?

[10] (a) What pressures or factors will executives use to encourage accounting managers and staff to go along with this type of situation? (b) What arguments can you use to resist those pressures? (c) How does one determine whether a company is aggressively reporting, but still in the guidelines of GAAP, versus fraudulently reporting financial information?

PROFESSIONAL JUDGMENT QUESTIONS

It is recommended that you read the Professional Judgment Introduction found at the beginning of the book prior to responding to the following questions.