1.During Parlex Chemicals’ media day, four executives spoke. Here are excerpts from all four executives speeches.

Calvin Baynard, CEO: “I’ve been a scientist all my life, but I want to assure shareholders that as CEO I am actively involved in both managing operations and setting accounting policy.”
Kristan Lenz, CFO: “I work closely with our auditors to make sure we are always on the same page.”
Melvin Jackson, COO: “In the past I have told you that Parlex would meet aggressive growth targets. I am proud to say that we have met those targets.”
Sally Yu, compliance director: “All of our executives are required to review Parlex’s ethics policy every year.”

Reporter John Bustard, CFA, is concerned that three of the executives are exhibiting attitudes or rationalizations that can lead to accounting fraud. Bustard should be least concerned about:

A)   Yu.

B)   Baynard.

C)   Lenz.

D)   Jackson.

2.Katharine Walls, CFA, works as an auditor for Pindale Accounting. She is concerned about Smith Fabrics, a company she audits. During her last visit to Smith Fabrics, the accounting director, Bob Fox, rudely ushered her into a tiny conference room with no telephone or computer, and gave her no key to the main accounting office. She was given only three days to finish what is normally a five-day job. Before he left Walls, Fox gave her a 150-page manual of Smith’s accounting policies for its various overseas divisions. After she finished her audit, Walls prepared a report for Pindale’s executive director, recommending that the firm drop Smith Fabrics as a client because she saw evidence of attitudes that could lead to fraudulent accounting. Walls cited three of Fox’s actions in her report, most likely leaving out:

A)   her rude welcome.

B)   the short deadline.

C)   the policy manual.

D)   her isolation from the accounting department.

3.The Statement on Accounting Standards No. 99, Consideration of Fraud in a Financial Statement Audit, identified nine risk factors related to attitudes and rationalizations that can lead to fraudulent accounting. The risk factors include:

A)   commitments to third parties regarding operational results, high management turnover, obsession with minimizing taxes.

B)   management obsession with a rising stock price, failing to fix problems promptly, strained relationships with auditors.

C)   inappropriate ethical standards, frequent use of materiality to justify leaving items off the books, declining customer demand.

D)   management obsession with a rising stock price, high management turnover, frequent use of materiality to justify leaving items off the books.

答案和详解如下：

1.During Parlex Chemicals’ media day, four executives spoke. Here are excerpts from all four executives speeches.

Calvin Baynard, CEO: “I’ve been a scientist all my life, but I want to assure shareholders that as CEO I am actively involved in both managing operations and setting accounting policy.”
Kristan Lenz, CFO: “I work closely with our auditors to make sure we are always on the same page.”
Melvin Jackson, COO: “In the past I have told you that Parlex would meet aggressive growth targets. I am proud to say that we have met those targets.”
Sally Yu, compliance director: “All of our executives are required to review Parlex’s ethics policy every year.”

Reporter John Bustard, CFA, is concerned that three of the executives are exhibiting attitudes or rationalizations that can lead to accounting fraud. Bustard should be least concerned about:

A)   Yu.

B)   Baynard.

C)   Lenz.

D)   Jackson.

The correct answer was C)

Working closely with auditors is a good thing. All of the other statements reflect behavior that can lead to fraudulent accounting. Baynard’s involvement in accounting policy could be problematic, considering his lack of financial experience. Jackson made a commitment to the media that the company would meet targets – that promise could spark a rationalization to falsify numbers to meet the target. Yu said all executives must review Parlex’s ethics policy, but what about everybody else? Most of the employees are not executives, and if the rank and file, including those in the accounting department, are not familiar with the firm’s ethical standards, it could breed ethical problems throughout the organization.

2.Katharine Walls, CFA, works as an auditor for Pindale Accounting. She is concerned about Smith Fabrics, a company she audits. During her last visit to Smith Fabrics, the accounting director, Bob Fox, rudely ushered her into a tiny conference room with no telephone or computer, and gave her no key to the main accounting office. She was given only three days to finish what is normally a five-day job. Before he left Walls, Fox gave her a 150-page manual of Smith’s accounting policies for its various overseas divisions. After she finished her audit, Walls prepared a report for Pindale’s executive director, recommending that the firm drop Smith Fabrics as a client because she saw evidence of attitudes that could lead to fraudulent accounting. Walls cited three of Fox’s actions in her report, most likely leaving out:

A)   her rude welcome.

B)   the short deadline.

C)   the policy manual.

D)   her isolation from the accounting department.

The correct answer was C)

A strained relationship between the auditor and management is a sign of a company with an attitude that could lead to accounting fraud. Domineering behavior such as the rude welcome is a sign of that strained relationship, as is the unrealistic deadline and isolation from the accountants. But providing Walls with the policy manual was a good idea. The fact that the manual is 150 pages long bespeaks problems with the complexity of the company’s accounting, but that is not evidence of a bad attitude. As such, the manual is least relevant to Walls’ argument.

3.The Statement on Accounting Standards No. 99, Consideration of Fraud in a Financial Statement Audit, identified nine risk factors related to attitudes and rationalizations that can lead to fraudulent accounting. The risk factors include:

A)   commitments to third parties regarding operational results, high management turnover, obsession with minimizing taxes.

B)   management obsession with a rising stock price, failing to fix problems promptly, strained relationships with auditors.

C)   inappropriate ethical standards, frequent use of materiality to justify leaving items off the books, declining customer demand.

D)   management obsession with a rising stock price, high management turnover, frequent use of materiality to justify leaving items off the books.

The correct answer was B)

High management turnover is related to the opportunity to commit fraud, rather than attitudes or rationalizations. Declining customer demand represents a pressure to commit fraud, rather than attitudes or rationalizations. All of the other factors cited are listed in SAS 99 as related to attitudes and rationalizations.