Annotation #3 20 E Share your user experiene on G2 and receive a USD25 gift card upon approval. Tap to get started. D F3 C IT Edit S4 $ Case 3.3 The Anonymous Caller: Recognizing It's a Fraud and Evaluating What to Do with my staff this morning, the bank is continuing to fund the line this morning. I really think the earnings misstatements first occurred this quarter and that the prior year audited financial statements are not misstated. Unfortunately, I had to sign a bank commitment letter only two weeks after joining the company. That commitment letter related to funding the loan right at the close of the last fiscal year. So, my signature is on file at the bank related to prior-year financial results. But, given the current events, I refused to sign the documents delivered to the bank on Friday. One of my accounting clerks resigned last week due to similar concerns. Our vice president of human resources (HR) discussed the resignation with me after learning about the clerk's concern during a final exit interview. I might add, however, that the HR vice president is the wife of the CEO." 000 000 F4 R "Anyway, I'm just not sure what responsibilities I have to disclose the earnings misstatements to outside parties. I am considering all sorts of options and thought I would see what advice you could offer. What do you think I should do, Dr. Mitchell? REQUIREMENTS What would you recommend to the caller if you were Dr. Mitchell? What are the risks of continuing to work with the company? What are the risks of resigning immediately? Could the state board of accountancy be a source of advice? 2. What responsibility, if any, does the caller have to report this situation directly to the bank involved? Before you respond, think about the risks present if the caller does inform the bank and it later turns out that the caller's assessment of the situation was inaccurate, i.e., there was no fraud. 3. What other parties, if any, should be notified in addition to the bank? What concerns do you have about notifying the external auditors? Do you think situations like this (i.e., aggressive accounting or even financial statement fraud) are common in practice? executives use to encourage accounting managers and staff to go along? What What pressures or factors will arguments can you use to resist those pressures? How does one determine whether a company is aggressively reporting, but still in the guidelines of GAAP, versus fraudulently reporting financial information? ople who study instances of financial statement fraud often note that three conditions are generally present for fraud to occur. First, the person perpetrating the fraud has an incentive or pressure to engage in fraud. Second, there is an opportunity for that person to carry out the fraud. Third, the person's attitude or ethical values allows the perpetrator to rationalize the unethical behavior. Describe F % 5 V ( Page Edit T F5 G A 6 B F6 Form & Sign 141% MacBook Air Y H & 7 N F7 U * CO 8 II Convert OCR OCR F8 M 1 JK ( 9