COMMERCE 1AA3 Lecture Notes - Lecture 4: Information System, Sarbanes–Oxley Act, Financial Statement

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Emad Mohammad

Document Summary

Internal misinterpretation of facts, made to persuade another party to act in a way that causes injury or damage to them. Misappropriation of assets - committed by employees who steal assets and cover it up in the books ex theft of inventory, falsifying invoices, forging or altering cheques etc. Fraudulent financial reporting committed by company managers who make false and misleading entries in the books, making them appear better than they are. Purpose is to deceive investors and creditors into making decisions they wouldn"t otherwise make if given accurate info. Reasons to meet profit targets to increase share prices. To meet loan covenants so lender doesn"t demand payment. To meet earnings target that will result in bonus. Opportunity weak internal controls improper access to assets, improper segregation of duties. Rationalization feels deserving, intelligent, feels that it is compensation for. Plan of organization and system of procedures designed, implemented and maintained by management to deal with risks to the business.