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Introduction to the Problem of Fictitious Financial Reporting
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Answer the following question with T for true or F for false for more practice with key terms and concepts from this chapter.
When companies settle a charge of civil fraud, they usually accept the SEC's findings.
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Fraud
Fraud refers to an illegal practice undertaken with an intention to mislead the truth, obtain money, personal gain, or receive undue advantage.
Generally, the companies do not admit or deny the findings in the settlement of civil fraud. Hence, the given statement is "False".
Therefore, the correct answer is
.
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It was problematic for WorldCom that its internal _________ department reported to the CFO, Scott Sullivan, who was the major originator of the company's accounting fraud.
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Accounting Fraud
It is a manipulation of financial statements made intentionally by an employee or the organization itself. It is made to show that financial health of the company is good and misleads the investors and shareholders of the company.
Company WC faced the following problems repetitively:
• Internal control was defective and inadequate.
• The company's internal control department was under staffed and those staffs in the department worked under the manager who was responsible for the conduct of audit.
Mr.S was the Chief Finance Officer (CFO)of the Company WC. It was challenging for the internal audit department in submitting the report to Company CFO, because the company's own CFO had initiated the entire accounting fraud. Hence, the correct answer is
.
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In 2008, countless investors held mortgage-backed securities that were backed by _________ mortgage loans.
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Financial Crisis of 2008
During 1999, the Glass-Steagall Act was revoked and that is replaced by the Financial Services Modernization Act. The latter Act was approved to remove imposed control on the banking segment in the Country U. But, this decontrol on baking division lead to the foundation for crisis in financial sector during 2008.
As a result of crisis, housing market and its value starts to sink. Numerous house owners begin to surrender their residence at the time of stoppage in mortgage repayment and this lead to toxic or risky mortgages loan.
Hence, the correct answer is
.
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In 1999, the Glass-Steagall Act was repealed and the Financial Services Modernization Act was passed to deregulate the _________ sector in the United States.
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In this text, the company used to illustrate the failure to disclose related-party transactions is _________.
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The National Crisis Inquiry Report (2011) concluded that the financial crisis was unavoidable.
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In the year _________, the Dodd-Frank Act established the Financial Stability Oversight Council (FSOC) as well as the Consumer Financial Protection Bureau (CFPB) in response to the financial crisis of 2008.
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To deal with the turmoil caused by the various accounting scandals, the SOX Act was passed in 1999.
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According to Lawrence and Wells, the three elements necessary to prove fraud are "a material false statement made with intent to deceive, a victim's reliance on the statement and _________."
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The PCAOB ended the self-regulation of the external auditing profession.
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One of the most contentious parts of the SOX legislation was Section _________, which addressed internal controls.
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One of the reforms of the Dodd-Frank Act is the requirement that has become known as the _________ Rule, which calls for a reduction of risky investments on the balance sheets of large financial firms.
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According to the Financial Crisis Inquiry Report , the lack of transparency in the balance sheets of major financial institutions was one of the causes of the financial crisis of 2008.
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The financial frauds at the turn of the millennium were limited to just a couple of varieties of sham reporting.
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CEO compensation in 2012 was _________ than CEO compensation in 2002.
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Most countries in Europe do not have stringent laws to protect whistleblowers.
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For the last few years, the FBI has had special _________ working in place at the SEC.
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By 2001, very little of top management compensation was in the form of stock options.
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The Glass-Stegall Act revised and increased the power of the SEC.
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In civil fraud, the burden of proof is higher than in criminal fraud.
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