Case Study 2 -Internal Control Dear Mr. President, I have completed my assessment of LBJ Company’s system of internal controls. To start off ‘companies generally design their systems of internal control to provide reasonable assurance of proper safeguarding of assets and reliability of the accounting records. The concept of reasonable assurance rests on the premise that the costs of establishing control procedures should not exceed their expected benefit.’ (Chp 7, Financial Accounting) Also
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Accounting: Accounting Fraud at WorldCom Date: 1/26/2015 3. What are the pressures that lead executives and managers to "cook the books"? The CEO and CFO of WorldCom wanted to “cook the books” because they wanted to keep the company’s stock price growing. Managers and accountants “cook the books” because they are forced to do so by their CEO and CFO. WolrldCom CEO Ebbers believed that increasing the stock price is their number one priority, so he set up a goal for the corporation--“The
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| Internal Auditing in Not-For-Profit Organizations | TABLE OF CONTENTS ABSTRACT: 2 INTRODUCTION 2 SECTION I: CORPORATE GOVERNANCE 3 1. Corporate Governance Reforms Relevant to NPOs 3 2. Audit Committees of NPOs 4 SECTION II: RISK MANAGEMENT 6 1. Absence of Risk Management in NPO 6 2. Reasons for Risk Management in NPO 7 3. Process of Risk Management in NPO 9 SECTION III: INTERNAL CONTROLS 10 1. An illustrative example 10 2. Good Internal Controls 11 3. Strengthening Internal
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COMPANIES: THE WORLDCOM FRAUD Introduction The purpose of this report is to investigate and discuss the accounting fraud that occurred at WorldCom in order to recommend improved strategies to Berkshire Hathaway’s management for avoiding investments in companies with fraudulent financials. Accounting fraud is a crime committed by high level employees at an organization to manipulate the organization’s financial statements and intentionally disguise company performance. The fraud is committed without
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Fraud Prevention and Management Recommendations The purpose of this Fraud Prevention Plan is to set out the approach to dealing with fraud risk within our organization. In order to prevent the types of frauds that have already occurred within our organization it will be necessary to create “a culture of honesty, openness, and assistance…..fraud prevention is where the big savings occur” (Albrecht, Albrecht, Albrecht, & Zimbelman, 2012, p.103). What is required is the implementation of a comprehensive
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the topic (30 marks). You are expected to answer each of the questions contained in the assignment. You’re answer should fully address the requirements of each question and be in your own words. Simply restating the contents of the text book, study guide or PowerPoint slides does not show individual understanding of the topic. Your answers should contain enough discussion on the question so as to clearly demonstrate your understanding of the topic area and provide sufficient detail which answers
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Jamaica Water Properties A Case Study The case is about an accounting fraud that involves the Jamaica Water Properties, Inc. The fraud was characterized by misapplication of purchase method of accounting for acquisitions, recording fictitious assets, improper accounting for NOLCO, non-recording of appropriate allowances for uncollectible receivables, and misapplication of the percentage-of-completion method of accounting for long-term contracts. Ernest Grendi made the fraud possible, company CFO as
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Major Case Study Cendant Corporation 1 Briefly summarize the accounting techniques used by Cadent to manipulate financial results. Categorize each technique into one of Schilit’s financial shenanigans. Cendant used aggressive accounting to shift current marketing expenses to a later period by capitalizing the cost; this is shenanigan number 4. Cendant also swift future expenses to the current period and later released reserves into income. When Cendant made acquisition, it took large restricting
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culturally. As the world has evolved, so has business, and as business has evolved so has auditing. The concept of auditing is as old as civilization. The need for a knowledgeable, external, third person to verify transactions or accounts and detect fraud has been present since the advent of trade and accounting. Thus the goal of auditing, in this sense, has not changed since. Teck-Heang Lee observed that “auditing serves as a mechanism to monitor conduct and performance, and to secure and enforce accountability
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Case Study 2 Situation a. In evaluating the internal control over cash payments of Yankee Manufacturing, an auditor learns that the purchasing agent is responsible for purchasing diamonds for use in the company’s manufacturing process, approving the invoices for payment, and signing the checks. No supervisor reviews the purchasing agent’s work. 1) Missing internal control characteristic: Segregation of duties 2) Possible problem: The employee who is approving invoices and signing the checks
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