Question

In: Accounting

The Treadway Commission was concerned about the fraudulent financial reporting that was occurring in the United...

The Treadway Commission was concerned about the fraudulent financial reporting that was occurring in the United States. Yet, numerous significant instances of fraudulent financial reporting occurred after publication of the COSO report.

Question: In the context of the five components of internal control cited by the COSO report, discuss what appears to have gone wrong in own words.

a) Think about the five components of control - control environment, risk assessment, control activities, information & communication, and monitoring.

Limitations on Internal Control

Monitoring the effectiveness of an internal control system should be a continuous process on the

part of both management and performance auditors. This regular scrutiny acknowledges that

an internal control system is not fail safe. Too many factors can impinge on the adequacy of the

controls. For example:

● Controls can quickly become outdated because of changing organizational conditions.

● Control activities may be strong, but the control environment or work setting may become

weak.

● Inappropriate controls may be in place. For example, an entity may be using detection

controls, designed to identify - after the fact - that errors or irregularities have occurred,

where it would have been better to adopt a prevention control designed to deter the

possibility of errors or irregularities occurring.

● Too many or too few controls may affect the ability of an agency to effectively fulfill its

mission.

● Intentional or unintentional staff deviation from prescribed controls can render a system

useless. Human factors such as boredom, personal problems, or other distractions can

result in errors.

● Inadequately trained or incompetent employees can reduce the effectiveness of controls.

● Collusion among employees or managers may nullify the internal control system.

● No internal control system can provide an absolute guarantee that errors or irregularities

will not occur. It can only provide reasonable assurance that management objectives will

be achieved. This assurance can be maintained if (a) management continuously monitors

the effectiveness of the controls in place, taking into consideration the costs and benefits

associated with those controls and (b) auditors provide independent assessments that the

control system is working.

Solutions

Expert Solution

solution

given data

The Treadway Commission was concerned about the fraudulent financial reporting that was occurring in the United States.

Yet, numerous significant instances of fraudulent financial reporting occurred after publication of the COSO report.

a.)

In  a "compelling" inner control framework, the accompanying five segments work to help the accomplishment of a substance's central goal, methodologies and related business destinations.

1. Control Environment

Uprightness and Ethical Values

Promise to Competence

Governing body and Audit Committee

The board's Philosophy and Operating Style

Authoritative Structure

Task of Authority and Responsibility

Human Resource Policies and Procedures

2. Hazard Assessment

Expansive Objectives

Procedure level Objectives

Hazard Identification and Analysis

Overseeing Change

3. Control Activities

Arrangements and Procedures

Security (Application and Network)

Application Change Management

Business Continuity/Backups

Re-appropriating

4. Data and Communication

Nature of Information

Viability of Communication

5. Observing

Progressing Monitoring

Separate Evaluations

Announcing Deficiencies


Related Solutions

The Treadway Commission was concerned about the fraudulent financial reporting that was occurring in the United...
The Treadway Commission was concerned about the fraudulent financial reporting that was occurring in the United States. Yet, numerous significant instances of fraudulent financial reporting occurred after publication of the COSO report. Question: In the context of the five components of internal control cited by the COSO report, discuss what appears to have gone wrong in own words.(Please Note: Position and exceptions, if any, are clearly stated. Organization of the argument is completely and clearly outlined and implemented. Research selected...
1. What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent...
1. What are the actions recommended by the Treadway Commission to reduce the possibility of fraudulent financial reporting? 3. Describe the difference between authentication and authorization? 4. What motives do people have for hacking? Why has hacking become so popular in recent years? Do you regard it as a crime? Explain your position. 5. What is the management's role in IS security?
1. support or critique the idea that the Committee of Sponsoring Organization of the Treadway Commission...
1. support or critique the idea that the Committee of Sponsoring Organization of the Treadway Commission (COSO) transition would strengthen internal controls over financial reporting in publicly traded companies. 2. determine the fundamental control deficiencies associated with the credit function. Next, propose at least one (1) control improvement that the credit department management could make in the process.
Discuss factors that an external auditor should consider in assessing the risk of fraudulent financial reporting...
Discuss factors that an external auditor should consider in assessing the risk of fraudulent financial reporting committed by a public company CFO or CEO. In discussing this topic, please consider risks of fraudulent financial reporting that are related to the fraud triangle (i.e., incentive/pressure, opportunity, and rationalization.). Also, research factors that the PCAOB and the AICPA identify as fraudulent financial reporting risks.
A study on fraudulent financial reporting by one of the most popular internal controls frame provider,...
A study on fraudulent financial reporting by one of the most popular internal controls frame provider, notes that there are many ways in which long-lived assets can be fraudulently overstated, including: a. Assets fictitious, on the books (WorldCom) b. Incomplete and Improper depreciation (Waste Management) c. Failure to record important of assets, especially goodwill (Sun Microsystems) d. Expired or worthless assets left on a company’s books (Millacron) e. Overvalued assets upon acquisition, especially in the purchase of a company (WorldCom)...
. Discuss the auditor’s responsibility for detecting fraud, including fraudulent financial reporting and misappropriation of assets....
. Discuss the auditor’s responsibility for detecting fraud, including fraudulent financial reporting and misappropriation of assets. Is there any sign that should alert the auditor to potential fraud?
A prison warden is concerned about the number of violent incidents occurring during the day at...
A prison warden is concerned about the number of violent incidents occurring during the day at his institution.  The staff psychologist indicates the inmates are probably not sleeping well at night causing them to behave aggressively. The psychologist furthers states that a large number of inmates did not receive proper maternal nurturing as children thereby causing sleep deprivation and aggression.  The warden selects three sleep improvement techniques to be tested among the inmates:  warm milk in a bottle just before bedtime; a correctional...
"Fraudulent Financial Reporting" As economic crimes increase globally, accounting fraud is consistently in the top three...
"Fraudulent Financial Reporting" As economic crimes increase globally, accounting fraud is consistently in the top three areas according to a global survey reflected in the chapter. Use the Internet or Strayer Library to research a company sanctioned for financial accounting fraud in the past five (5) years. Give your opinion on the situational pressures that caused perpetrators to commit the fraudulent reporting. Assess the opportunities for fraudulent financial reporting and discuss ways the company you researched could eliminate fraudulent reporting
Auditing - Fraud through Misappropriation of Assets or Fraudulent financial reporting State one type of fraud...
Auditing - Fraud through Misappropriation of Assets or Fraudulent financial reporting State one type of fraud that can occur for the accuracy objective of provision for warranty (liability account) State one type of fraud that can occur for the sales occurrence objective of sales revenue (revenue account)
What is the opinion based on the Treadway Commission? (See paragraphs below) Please raise thoughtful questions,...
What is the opinion based on the Treadway Commission? (See paragraphs below) Please raise thoughtful questions, analyze relevant issues, build on ideas, synthesize across readings and discussions, expand the class perspective, and appropriately challenge assumptions and perspectives in own words. What is the opinion based on the Treadway Commission? (See paragraphs below) Please raise thoughtful questions, analyze relevant issues, build on ideas, synthesize across readings and discussions, expand the class perspective, and appropriately challenge assumptions and perspectives. The National Commission...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT