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Capstone Project - Research Paper Example
Author : nmuller
Finance & Accounting
Pages 6 (1506 words)
Capstone Research Project GAAP Rules for Determination of Fraud During the month of February, 1997, the Statement in Auditing Standards (SAS) No. 82, Consideration of Fraud in a Financial Statement Audit was issued by the American Institute of Certified Public Accountants (AICPA) Auditing Standards Board (ASB)…
The foremost factor that has to be understood before representing the misstatement as a fraud is the ‘nature of misstatement’. Nature represents as to whether the misstatement has been made intentionally or unintentionally. According to the specifications within SAS No. 82, fraud is an action that is conducted intentionally and as a result of which ‘material misstatements’ occur within a firm’s financial statements (American Institute of CPAs, 2011). There are several indicators of fraud that have been represented within the SAS No. 82. These are also considered as factors of risk, few of which have been listed below. The consideration of these cases will definitely help in identifying fraud in the given five scenarios within the case. Indicators of Fraud in Relation to Financial Reporting: (a) A massive amount of compensation for the management has been stated to be in structure of bonuses. (b) The management of the firm is dominated by an only individual or a very small group without allowing any role of the board of directors. (c) Involving into regular disputes with the present or previous management or auditors on issues related to auditing and accounting. (d) Limitations imposed on the auditor for improperly restricting activities related to key information and people. (e) Failure to pay the bills while there is reportedly huge earnings. ...