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• Explain In Your Own Words How SOX Has Impacted Financial Statement Fraud

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1. Explain in your own words how SOX has impacted financial statement fraud. The Sarbanes-Oxley Act (SOX) was enacted in 2002 as a result of the numerous financial statement fraud perpetrated by major corporations from various industries. One of the many objectives of SOX was to create more independence between the financial auditors and executive management. Financial Statement fraud is usually perpetrated by executive management. (Singleton, 2010, pp.74) The following changes implemented by SOX have helped reduced financial statement fraud: management must state their responsibility for internal controls; an internal control evaluation report must be signed by the chief executive officer and the chief financial officer (SOX section 404). Another positive impact on financial statement fraud is the independence of boards of directors from a …show more content…

This type scheme is done by creating an employee in the payroll system; this employee can be real or fictitious. A payroll check is approved and issued under the ghost employee’s name and finally pickup by the fraudster or an accomplice. (Singleton, 2010, pp. 88) 7. What is the receivables lapping scheme? Receivables lapping scheme is a dishonest accounting technique that conceals stolen cash by overlapping consecutive receivables. A receivables lapping scheme begins when a fraudster steals customer A’s payment and pays it back with customer B’s payment. Then the fraudster steal from customer C and pays B’s account with payment from customer D. The problem with this scheme is that it leaves accounts C and D overstated and unpaid. (Singleton, 2010, pp.91) 8. What are the common red flags associated with financial statement frauds? Financial statement frauds are usually perpetrated by executive management; the common red flags associated with this fraud

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