Chapters 1&2 Flashcards
(34 cards)
What does SAS 53 focus on?
The auditor’s responsibility to detect and report errors and irregularities (1988).
What did SAS 82 introduce in audits?
Assessment of risk of material misstatement due to fraud, including financial reporting and asset misappropriation (1997).
What did SAS 99 define about fraud?
Fraud as an intentional act causing material misstatement; introduced brainstorming, management inquiries, and fraud risk evaluation (2002).
What key law was passed in 2002 affecting audits?
Sarbanes-Oxley Act (SOX).
Name three impacts of SOX.
Auditor independence, corporate responsibility, enhanced disclosures, internal control assessment, real-time disclosures, criminal penalties, increased violations penalties, whistleblower protection.
Define forensic accounting.
Identifying, recording, settling, extracting, sorting, reporting, and verifying past financial data for legal disputes.
What are the two broad areas of forensic accounting per AICPA?
Investigative accounting and litigation services.
What is fraud examination?
Following up on fraud predication to determine if fraud occurred, by whom, how much, and how.
How does forensic accounting differ from auditing?
Broader scope, proactive/ongoing focus, adversarial and non-adversarial, principles-based.
What distinguishes a forensic accountant from a fraud auditor?
Forensic accountants apply broader accounting, consulting, and legal skills and may provide expert testimony.
Name five key knowledge areas for forensic accountants.
Accounting, auditing, investigative skills, legal knowledge, criminology, IT knowledge, communication skills.
What are key auditing skills useful in forensics?
Analytical procedures, vertical/horizontal/ratio analysis, risk assessment, internal controls understanding.
What types of evidence are gathered in investigations?
Physical, testimonial, documentary, demonstrative.
Name two key concepts in legal knowledge for forensic accountants.
Burden of proof (civil: preponderance; criminal: beyond reasonable doubt), types of evidence (direct, circumstantial).
What is the fraud triangle?
Incentive/pressure, opportunity, rationalization.
How is IT used in forensic accounting?
Data mining, text/email analytics, computer forensics to recover hidden electronic evidence.
Why are communication skills crucial in forensic accounting?
For oral testimony, interviewing, and producing expert/fraud report
What is a common forensic accounting mindset vs. an auditor mindset?
Forensic accountant: “Nothing is as it seems”; Auditor: “Trust but verify.”
What professional backgrounds benefit from forensic accounting skills?
Accountants, consultants, auditors, IRS agents, FBI agents, SEC accountants, bankruptcy specialists, professors, bank examiners, CFOs, business valuators.
An AICPA committee in 1986 broke forensic accounting into two broad areas:
Investigative accounting and litigation services
Which would be included in the AICPA’s definition of forensic accounting?
Investigative skills, auditing, quantitative methods, accounting
What are the 6 areas of litigation services that the AICPA committee suggested in 1986?
Damages, Valuation, Bankruptcy, Tax analysis
When comparing a forensic audit with a financial audit, which item would indicate a financial audit?
A. more time consuming
B. Worrying about the rules of evidence
C. Extensive use of interviewing
D. A sample Process
E. All of the above
D
The following characteristics will indicate a forensic accounting investigation:
Principles based, proactive and ongoing, future and historical
