Question

The text identifies a number of personal traits of  managers and other employees that might help  uncover fraudulent activity. Discuss three traits.

Answer 1

Some of the larger public accounting firms have developed checklists to help uncover fraudulent activity during an audit. Questions for such a checklist might include:

p. Do key executives have unusually high personal debt?

q. Do key executives appear to be living beyond their means?

r. Do key executives engage in habitual gambling?

s. Do key executives appear to abuse alcohol or drugs?

t. Do any of the key executives appear to lack personal codes of ethics?

u. Are economic conditions unfavorable within the company’s industry?

v. Does the company use several different banks, none of which sees the company’s entire financial picture?

w. Do any key executives have close associations with suppliers?

x. Is the company experiencing a rapid turnover of key employees, either through quitting or being fired?

y. Do one or two individuals dominate the company?