ACT 205 Chapter Notes - Chapter 4: Risk Assessment, Internal Control, Financial Statement
Document Summary
Occurs when a person intentionally deceives another person for personal gain or to damage that person. The use of one"s occupation for personal enrichment through the deliberate misuse or misapplication of the employer"s resources. Sources: misuse of company resources, financial statement manipulation. *cash is the asset most commonly involved in fraudulent activity. The situation allows the fraud to occur: motivation. Justification for the deceptive act by the one committing the fraud. Eliminate opportunity: safeguard the company"s assets, improve the accuracy and reliability of accounting information. Applies to all companies that are required to file financial statements with the sec. Represents one of the greatest reforms in business practices in us history. Created in response to accounting scandals and unethical behavior. Five components of internal control: control environment. Sets the ethical tone of the company with respect to internal control. Identifies and analyzes internal and external risk factors that could prevent a company"s objectives from being achieved: control activities.
