an example like these

apter b topics like revenue recognition, bad debt expense, and cash management are often areas where earnings management or even outright fraud could occur. Internal controls are designed to help prevent and detect these potentially damaging practices. Provide an example from Chapter 6 of how a company could potentially manipulate earnings or perpetrate a fraud, and identify an internal control to help prevent such a dubious practice from happening. One of the more frequently seen cases of fraud is employees using company funds to purchase personal items, basically stealing money from the business. Employees could do this in a number of ways, including taking money from the register or taking inventory without permission. For example, let's say I worked at a grocery store, and every day at the end of my shift I took $5 from the register, to buy myself a sandwich for lunch. Some may say 'it's just $5' but financial reports will be off. Especially if I took $5 every day, and I worked five days a week, this would total in thousands by the end of the year. Then maybe one day I told my friend and coworker Joe that I take $5 from the register everyday and no one notices, so he then starts doing it. Now the amount of money stolen has doubled. One effective internal control of cash that would prevent this type of fraud would be a prescribed policy and procedure such as require all cash receipts be deposited in a bank daily. This will keep any cash on hand under strict control, because most likely in a week the bank would notice money is missing and would begin to keep an eye on it. If the trend continued, I would eventually be caught taking the $5 everyday, and would be in big trouble. Having procedures like this in place would lessen the likelihood of a fraud like this happening because employees are aware, and if there was an incident, it increases the likelihood that the employee would be caught One of the ways companies could potentially manipulate earnings or perpetrate a fraud is by shifting current expenses and revenue to an earlier or later period. When a company takes advantage of their normal operating costs by moving costs from the income statement to the balance sheet, they are able to reduce the company's initial expenses by increasing net income as a way to appear more attractive to investors. By failing to write down the sum of a company's impaired assets a company is also committing to shifting expenses for the purpose of fraud. Some company's would also implement fraud by using revenue reserves, holding back revenue that is meant to be allocated as expense money in order to further manipulate the appearance of greater present earnings and better future performances. Internal Controls that could help prevent these dubious practices from happenings would be to utilize standardized financial documentations used for financial transactions that the company is making, including expenses and revenue that the company chooses to apply within the current date. Applying weekly or daily trial balances would also provide the reliability and clearance to ensure that each expense and revenue constructed is added accordingly, preventing future discrepancies to arise apter b topics like revenue recognition, bad debt expense, and cash management are often areas where earnings management or even outright fraud could occur. Internal controls are designed to help prevent and detect these potentially damaging practices. Provide an example from Chapter 6 of how a company could potentially manipulate earnings or perpetrate a fraud, and identify an internal control to help prevent such a dubious practice from happening. One of the more frequently seen cases of fraud is employees using company funds to purchase personal items, basically stealing money from the business. Employees could do this in a number of ways, including taking money from the register or taking inventory without permission. For example, let's say I worked at a grocery store, and every day at the end of my shift I took $5 from the register, to buy myself a sandwich for lunch. Some may say 'it's just $5' but financial reports will be off. Especially if I took $5 every day, and I worked five days a week, this would total in thousands by the end of the year. Then maybe one day I told my friend and coworker Joe that I take $5 from the register everyday and no one notices, so he then starts doing it. Now the amount of money stolen has doubled. One effective internal control of cash that would prevent this type of fraud would be a prescribed policy and procedure such as require all cash receipts be deposited in a bank daily. This will keep any cash on hand under strict control, because most likely in a week the bank would notice money is missing and would begin to keep an eye on it. If the trend continued, I would eventually be caught taking the $5 everyday, and would be in big trouble. Having procedures like this in place would lessen the likelihood of a fraud like this happening because employees are aware, and if there was an incident, it increases the likelihood that the employee would be caught One of the ways companies could potentially manipulate earnings or perpetrate a fraud is by shifting current expenses and revenue to an earlier or later period. When a company takes advantage of their normal operating costs by moving costs from the income statement to the balance sheet, they are able to reduce the company's initial expenses by increasing net income as a way to appear more attractive to investors. By failing to write down the sum of a company's impaired assets a company is also committing to shifting expenses for the purpose of fraud. Some company's would also implement fraud by using revenue reserves, holding back revenue that is meant to be allocated as expense money in order to further manipulate the appearance of greater present earnings and better future performances. Internal Controls that could help prevent these dubious practices from happenings would be to utilize standardized financial documentations used for financial transactions that the company is making, including expenses and revenue that the company chooses to apply within the current date. Applying weekly or daily trial balances would also provide the reliability and clearance to ensure that each expense and revenue constructed is added accordingly, preventing future discrepancies to arise