Fraud risk – indicator (=significant risk of MM)
1. Due to pressures to meet market expectations (High degree of competition; Rapid change 新学期目标怎么写 changes in technology, product obsolescence, or interest rates; Significant declines in customer demand; Operating loss游戏推广系统; Rapid growth or unusual profitability)
2. Due to a desire to maximize compensation bad on performance
3. Due to cure bank financing (Banking covenants)
4. New accounting, statutory, or regulatory requirements
5. Integrity and competence of mgt
6. High turnover of nior management, legal counl, or tho charged with governance
7. Known history of violations of curities laws or other laws and regulations, or claims against the entity
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8. Negative cash flows from operations or an inability to generate cash flows from operations while reporting earnings and earnings growth.
9. Inadequate gregation of duties
10. Removable+ Small ast with large value
帅气动漫图片Risk Factors Relating to Misstatements Arising from Fraudulent Financial Reporting
The following are examples of risk factors relating to misstatements arising from fraudulent financial reporting.
Incentives/Pressures
1. Financial stability or profitability is threatened by economic, industry, or entity operating conditions, such as (or as indicated by) the following:
• 山地自行车High degree of competition or market saturation, accompanied by declining margins.
• High vulnerability to rapid changes, such as changes in technology, product obsolescence, or interest rates.
• Significant declines in customer demand and increasing business failures in either the industry or overall economy.
• Operating loss making the threat of bankruptcy, foreclosure, or hostile takeover imminent.
• Recurring negative cash flows from operations or an inability to generate cash flows from operations while reporting earnings and earnings growth.
• 湖南农业大学分数线Rapid growth or unusual profitability especially compared to that of other companies in the same industry.
• New accounting, statutory, or regulatory requirements.
2. Excessive pressure exists for management to meet the requirements or expectations of third parties due to the following:
• Profitability or trend level expectations of investment analysts, institutional investors, significant creditors, or other external parties (particularly expectations that are unduly aggressive or unrealistic), including expectations created by management in, for example, overly optimistic press releas or annual report messages.
• Need to obtain additional debt or equity financing to stay competitive, including financing of major rearch and development or capital expenditures.
• Marginal ability to meet exchange listing requirements or debt repayment or other debt covenant requirements.
• Perceived or real adver effects of reporting poor financial results on significant pending transactions, such as business combinations or contract awards.
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3. Information available indicates that the personal financial situation of management or tho charged with governance is threatened by the entity’s financial performance arising from the following:
• Significant financial interests in the entity.
• Significant portions of their compensation (for example, bonus, stock options, and earn-out arrangements) being contingent upon achieving aggressive targets for stock price, operating results, financial position, or cash flow.5
• Personal guarantees of debts of the entity.
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4. There is excessive pressure on management or operating personnel to meet financial targets established by tho charged with governance, including sales or profitability incentive goals.
Opportunities
1. The nature of the industry or the entity’s operations provides opportunities to engage in fraudulent financial reporting that can ari from the following:
• Significant related-party transactions not in the ordinary cour of business or with related entities not audited or audited by another firm.
• A strong financial prence or ability to dominate a certain industry ctor that allows the entity to dictate terms or conditions to suppliers or customers that may result in inappropriate or non-arm’s length transactions.
• Asts, liabilities, revenues, or expens bad on significant estimates that involve subjective judgments or uncertainties that are difficult to corroborate.
• Significant, unusual, or highly complex transactions, especially tho clo to period end that po difficult “substance over form” questions.
