...Caso 08-9: Fraud and Illegal Act. Análisis del Caso: I. Requerimiento 1: a. Antes de que fuese completada la auditoria del año 2010 se recibió una llamada por parte del Sr. Tube, Director de Ética y cumplimiento, donde el notifica al equipo de auditoria de una llamada recibida en anonimato donde la persona, hace una alerta sobre un posible fraude o práctica ilegal en términos de procedimientos contables. Esta confidencia a su vez, hace referencia al posible incumplimiento de los procesos y controles internos de la empresa, así como la integridad y exactitud en la presentación de la información financiera. Debido a la importancia de esta declaración y al impacto que esta situación puede tener, el Comité de Auditoria de la Junta de Directores de Joahnnie’s Surfboards Inc., debería seguir los siguientes pasos: Evaluar la confiabilidad de la fuente o persona que hace la denuncia. Hacer un análisis de las alegaciones o los hechos que en conjunto con evidencia los lleve a suponer de que en efecto si hubo un fraude o una práctica ilegal dentro de la empresa. Identificar las posibles causas por la que se pudo haber cometido el fraude o el acto ilegal. Discutir posibles resultados de la investigación y que acciones pueden ser tomadas. Establecer quién va a llevar a cabo la debida investigación. Evaluar y analizar los resultados de la investigación. Contratar asesoría legal para el proceso de enjuiciamiento. Presentar resultados a la Gerencia. Desarrollar...
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...08-9 Case 08-9 Fraud and Illegal Acts We have been hired to perform an audit of Jersey Johnnie’s Surfboards Inc. (the “Company”), which is an SEC registrant. Before completing the December 31, 2005, audit of the Company, Harry Hodad, the engagement partner, received a call from Tom Tube, the Company’s director of ethics and compliance. Mr. Tube said that the Company’s outside service provider that receives calls to the Company’s ethics and compliance hotline had informed him directly that the hotline had received a call alleging certain accounting improprieties as well as concerns about management’s overall commitment to accurate financial reporting. The transcript of the call was provided to the engagement partner and is included as Attachment I. Required: What steps should management, the Board of Directors, or the Audit Committee of the Board of Directors take in response to allegations of possible fraud or illegal acts? The steps that management, the Board of Directors, or the audit Committee of the Board of Directors should take in response to allegations of possible fraud or illegal acts are that they should pay extra attention to transactions, accounts, issues, or situations that could indicate fraudulent behavior or illegal acts. When they are more aware of information that could lead to a fraud discoveries or illegal acts they should determine if fraud or illegal acts are possible. The next step is to see if possible fraud and illegal acts might materially...
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... Statutory Law A. Securities Act of 1933 B. Securities Exchange Act of 1934 C. RICO Act D. Private Securities Reform Act of 1995 I. Common Law A. Clients B. Third Parties C. Burden of Proof D. 1136 Tenants Case II. Terms A. Ordinary Negligence B. Gross Negligence C. Fraud D. Joint and Several Liability E. Proportionate Liability III. Limited Liability Partnerships vs. Limited Liability Corporations 4-1 Legal Responsibilities of the Independent Auditor I. Statutory Laws - Potential legal liability as defined by the Securities Act of 1933, the Securities Exchange Act of 1934, the Rico Act of 1970, and the Private Securities Litigation Reform Act of 1995. Questions concerning the Securities Acts of 1933 and 1934. 1. Describe the general purpose of each Act. 2. How does the auditor become subjected or exposed to each Act? 3. What are the specific provisions of each Act? Include in your discussion: -Who is the plaintiff? -Who has the burden of proof? -What civil or criminal penalties are provided by the Acts? A. Securities Act of 1933 1. Regulates the initial sale of securities in interstate commerce. 2. Auditor becomes subjected to the Act when he/she audits the financial statements that must...
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...Chapter seven: fraud risk assessment Definitions related to fraud * White collar crime: Misdeeds committed by business and government professionals, typically non violent * Fraud: in a financial statement audit team, an intentional act by one or more individual amount management, those charged with governance, employees or third parties, involving use of deception to obtain an unjust or illegal advantage is knowingly making material misrepresentations of fact, with the intent of inducing someone to believe the falsehood, act upon it, and thus suffer a loss or damage. * Employee fraud: the use of dishonest means to take money or other property from an employer it consist of three phases: 1. The fraudulent act, 2. The conversion of the money or property to the fraudster’s use, 3. The cover up * Embezzlement: fraud involving employees for non-employees wrongfully taking money or property and trusted to their care, custody, and control; often accompanied by false accounting entries and other forms of lying and cover up * Defalcations: fraud in which an employee takes assets such as money or property, from an organization for personal gain; may be due to correction or asset misappropriation * Fraudulent financial reporting : intentional manipulation of reported financial results (by manipulation of accounting records for supporting documents, misrepresentation or omission of significant information, or intentional misapplication of accounting...
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...compromise and settlement agreement can be invalidated. If a settlement agreement fails to establish certain elements like offer, acceptance and consideration, it can be invalidated. Similarly, a settlement agreement can be invalidated due to: * Fraud; * Nondisclosure as fraud; * Duress; * Illegality; * Mistake; * Undue influence. A compromise induced by fraud can be invalidated. In approving a proposed settlement agreement, a court must determine that the agreement is not the outcome of fraud[i]. Fraud exists if all of the following elements are present: * An untrue representation of fact knowingly by a party; * Making such representation recklessly; * Making untrue representation to deceive the other party and to induce him/her to act upon the same. Similarly, an unintentional nondisclosure without an intention to deceive will not constitute fraud. However, a compromise can be invalidated for fraud if one party deliberately conceals facts with the intent to induce the action of other party. The duty of disclosure is more comprehensive when there is a fiduciary relationship between the parties to the compromise. At the same time, it cannot be presumed that the elements of fraud exist only because of the existence of a fiduciary relationship. Likewise, a person who makes a compromise as a result of duress invalidates the same. Duress is defined as the imposition, oppression, undue influence or the taking advantage of the...
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...Subject Matte 1. Compare and contrast the nature of white collar crime with other type types of illegal acts. 2. Compare and contrast the typical participants of white collar crime against the participants of other types of illegal acts 3. Discuss the role of technology in white collar crime and how its role may create differences from other forms of crime. 4. Analyze the role of “opportunity” and how it contributes to white collar crime. Provide specific examples to support your response. When Edwin Sutherland first began his study/analysis under the Traditional Summary Reporting System, there was a limited amount of information available on White Color Crime. The white-collar offenses that are measured are fraud, forgery/counterfeiting, embezzlement, and all other offenses. Because white-collar crimes are not Index crimes, the only information available on these offenses is arrest information, which includes age, sex, and race of the arrestee. Additionally, all other offenses arrest category is very limited in its ability to measure the white-collar offenses included in its counts. This is due to the inability to differentiate the white-collar offenses from the others that also fall in this category. Based upon the most recently published data from the FBI, the arrest rates for the offenses of embezzlement, fraud, and forgery/counterfeiting are much lower than the arrest rates for property, crime, or for total crimes in general....
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...Chapter 22 COMPUTER CRIME: PORNOGRAPHY, FRAUD, HACKING AND GAMBLING CHAPTER SUMMARY The Internet, a relatively recent phenomenon, has caused a change in how laws may or may not apply to formerly traditional situations. Furthermore, the Internet has allowed criminals to perpetrate crimes that could not exist but for cyberspace. Chapter 22 examines computer crime and the statutes enacted to combat this growing problem as well as the erosion of our personal privacy. Freedom of speech, online gambling and cybermedicine issues are also examined in light of contemporary applications and influences resulting from the Internet. CHAPTER OUTLINE I. COMPUTER CRIME AND CYBERCRIME A. Definitions 1. Computer crime consists of crimes involving: • Computers • Computer systems • Computer applications. 2. Cybercrime consists of computer crime that takes place in cyberspace 3. The Internet facilitates a number of opportunities for crimes to occur. 4. Typical cybercrime abuses include: • Hacking • Spreading of viruses • Fraud • IP theft • Appropriation of trade secrets • Defamation B. The USA Patriot Act, 2001 1. The USA Patriot Act provided significant new powers to federal law enforcement agencies. ...
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...cases of fraud in the financial sector. This can partly be explained by the complex nature of the financial instruments that were used, which are hard for regulators to decipher and for judges to interpret whether any fraud occurred. It seems that the missing ingredient in most prosecutions has been the absence of any forthcoming information from insiders. Whistle blowing has been almost nonexistent during the run up to the financial crisis and its aftermath. This is reflective of the negative stigma that is associated with whistle blowing in most businesses and corporations. Combined with a culture of silence that is prevalent in the finance and accounting industries this is not a big surprise. Federal regulators and congress have been encouraging whistleblowers to step up in recent years, however more must be done. Regulators must continue to improve protection and incentives for whistleblowers to come forward. In addition corporate culture must change in its negative view of whistle blowing. Most importantly though professionals, especially accountants must understand that they are serving the public interest and thus must step up and reveal any fraudulent or unethical activities that hurt the public. Whistle blowing is hard to encourage and federal authorities have been doing terrible job of it until recently. The trend has been changing, first with the passing of the Sarbanes-Oxley Act in 2002 that included a provision for expanded whistle blower protection. The act made it...
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...was a friend or a high ranking official, should you speak or keep silent, these and many others are the complex situations that could happen within a business organization. Whistle blowing, which seems to become increasingly common as employees speak out about ethical concerns or illegal practices in the work place to the public or to authorities. “There is a great deal of evidence to suggest that whistle blowing is one of the most important sources of information or detecting and reducing illegal and unethical corporate behaviors” (Kohn 2011). In general, whistle blowers feel a need to report the incident in order to put a stop to the illegal or ethical concern in the business or to correct them from happening on a regular basis. In the past years, there have been a lot of cases where employees have decided to come up in public eye and expose the unethical behavior within their companies. There is no doubt that many unquestionable practices among business organizations are being committed daily. With all the recent cases of corporate fraud, companies now provide for internal rules to protect the whistle-blower against retaliation, harassment or intimidation of the person involved in the illegal act. In order to encourage disclosure, many federal and state statutes prohibit employers from retaliating against an employee who files such reports. Often time’s whistle blowers, because of what they do to expose the wrong doing of others are considered as traitors within a business...
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...from breaking-and-entering and robbery at gunpoint, to complete identity theft, fraud, and robbery without lifting a finger via electronic manipulation of banking systems. To help battle these new criminal activities caused by advancements in technology, Congress passed the “Electronic Funds Transfer Act of 1978”, which establish consumer rights and protections when transferring funds via electronic systems. According to "Federal Deposit Insurance Corporation" (n.d.), “the purpose of this title to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems. The primary objective of this title, however, is the provision of individual consumer rights” (Electronic Funds Transfer Act). With the establishment of the Electronic Funds Transfer Act of 1978, a new standard was established to protect consumers from theft and illegal monetary transfers from accounts. The act established accountability and liabilities for both consumers and banking institutions to hold parties accountable for funds transfers and illegal accounting activities. Further measures were taken to restrict criminal activities with the establishment of the Computer Fraud and Abuse Act of 1986. The act establish guidance and identified misuse of electronic systems and computers for criminal activities. According to 99 Congress (1986), “the act governs knowingly and with intent to defraud, accesses a Federal interest computer...
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...Information Technology Acts Paper Ryan Beland BIS/220 Mr. Vozella 7/28/2104 In today’s world we do not start our mornings with an essential meal, a cup of coffee, and reading the newspaper; but with the simple press of one of the most iconic buttons, the power button. The dramatic increase in technology demands the attention of almost every person across the globe as they connect, work, and coordinate daily plans and objectives with those close and far away. Information technology is one of the largest demanded and growing systems users have available. Information technology is the use of computer and telecommunication based systems; to store, send, manipulate, and retrieve data information across the various environments for the users utilizing the systems (Wikipedia, 2014). From professional, academic and personal situations these systems are more than ever present in the daily routine. The increased demand and use of these systems does make daily tasks easier and quicker to complete, but even the most beneficial tools can come with a cost. The information systems we utilize improve efficiency and effectiveness, but open doors for dangerous, illegal, and unethical actions. In order to control or limit these technological woes, various laws and procedures have been put in place to protect the users and societies that wish to implement these systems features into their lives. In this paper we will examine two laws specifically what they entail, the ethical dilemmas...
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...opinion or to issue a report as a result of this engagement. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, tests of the physical existence of inventories, and direct confirmation of receivables and payables and certain other assets and liabilities by correspondence with selected customers, creditors, and financial institutions. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Because an audit is designed to provide reasonable, but not absolute, assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or illegal acts, may exist and not be detected by us. In addition, an...
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...Chapter 2 Financial Statement Audits and Auditors' Responsibilities |Learning Check | 2.1 The ultimate objective of accounting is the communication of relevant and reliable financial data that will be useful for decision making. Accounting methods involve identifying the events and transactions that affect the entity. Once identified, these items are measured, recorded, classified, and summarized in the accounting records and reported in accordance with generally accepted accounting principles (GAAP). The accounting process is carried out by an entity's employees, and ultimate responsibility for the financial statements lies with the entity's management. The primary objective of an audit is to add credibility to management's financial statements. The typical audit performed in accordance with generally accepted auditing standards (GAAS) involves obtaining and evaluating evidence concerning management's financial statements. Auditing culminates in the issuance of an audit report that contains the auditor's opinion on whether the financial statements do in fact present fairly the entity's financial position, results of operations, and cash flows in conformity with GAAP. The auditor is responsible for forming and expressing an opinion on the entity’s financial statements. 2.2 Verifiability is primarily concerned with the availability of evidence. In an audit the auditor needs to obtain evidence to support conclusions about the fair presentation...
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...a financial contract “shall be put to death as a thief” whereas in Medieval Catalonia, a failed banker was required to live on bread and water until they paid back their depositors. Despite this, financial crimes of varying degrees still occurred. In today’s financial world, it is increasingly difficult to prosecute financial crimes. The issue that routinely arises is whether or not the suspect’s conduct was illegal as opposed to simply greedy. Federal prosecutors have consistently explained that they need to prove intent in order to convict financial crimes. In order to facilitate a more consistent prosecution rate of financial criminals, it is essential that federal attorneys utilize creative thinking in reference to the web of federal statutes that can be brought against financial institutions that violate regulations in their quest for more money.In order to better identify illegal activity, it is essential that the country enact legislation in line with the Sarbanes-Oxley Act (SOX) to clearly outline what is considered illegal. Thanks to the Sarbanes-Oxley Act, board executives must sign-off on...
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...Business I. Explaining how and why fraud invalidates a contract. A. There are certain grounds under which a compromise and settlement agreement can be invalidated. If a settlement agreement fails to establish certain elements like offer, acceptance and consideration, it can be invalidated. Similarly, a settlement agreement can be invalidated due to: * Fraud * Nondisclosure as fraud * Duress * Illegality * Mistake * Undue influence A compromise induced by fraud can be invalidated. In approving a proposed settlement agreement, a court must determine that the agreement is not the outcome of fraud. Fraud exists if all of the following elements are present: * An untrue representation of fact knowingly by a party * Making such representation recklessly * Making untrue representation to deceive the other party and to induce him/her to act upon the same. Similarly, an unintentional nondisclosure without an intention to deceive will not constitute fraud. However, a compromise can be invalidated for fraud if one party deliberately conceals facts with the intent to induce the action of other party. The duty of disclosure is more comprehensive when there is a fiduciary relationship between the parties to the compromise. At the same time, it cannot be presumed that the elements of fraud exist only because of the existence of a fiduciary relationship. Likewise, a person who makes a compromise as a result of duress invalidates the...
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