Should internal controls prevent financial statement fraud?
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Should internal controls prevent financial statement fraud? Explain.
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Solution Summary
The 314 word solution reviews the stated purposes for internal control procedures, and then give examples of how fraud could occur even with good internal controls.
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The stated purposes for internal control procedures are
1. To produce reliable financial statements,
2. To comply with laws and regulations
3. To have effective and efficient operations
4. To safeguard assets
Your definition of 'financial statement fraud' could include 1, 2 and 4 above. Examples:
1. A company did not adequately allow for loans that might go bad in the current year. As a result, the financial statements overstate profit. This may be ...
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