Discuss the motives of why C-Suite executives would commit fraud and how understanding the motive for fraud can assist an auditor in the analysis of financial statements. Determine if government regulations such as SOX and PCAOB are effective in reducing unethical behavior of corporate executives, and if additional organizational controls could be applied to expose and reduce fraud committed by C-Suite executives.
Respond:
- The pressure on the individual
It entails to the pressure emanating from a financial situation like debts, as well as the shortfall regarding the revenues. Most of the executive see such problems as difficult to get solved via the proper methods, thus resorting to engaging in fraudulent activities to fulfill their financial challenges (Wells, & Hymes, 2013).
- The opportunity to commit fraud
It refers to the situation where an executive sees a clear course of action through which they can fleece the company, by the use of their position, without their wrong action getting noticed (Wells, & Hymes, 2013).
- Ability to rationalize crime
This stage of fraud triangle calls for the executive officer to make use of their cognitive skills so that they justify their crime activities within the organization. Their explanations tend to be so convincing to the rest of the organization’s members, that their action gets seen as just (Wells, & Hymes, 2013).
The accountants are likely to take part in preparing questionable accounting estimates through altering of financial statements, for instance by adding non-existence risks so that they use the extra finances to fulfill their financial needs. More, the accounting officer can decide to quote the cost of a given risk way too high so that they get the extra cash for their usage.
I believe that the SOX, together with the PCAOB have been very effective in controlling any fraudulent actions by the executive officers in their respective corporate. For instance, the SOX came up with law review, regarding the selection of an independent auditor through the lifting of this requirement from the authority from getting held by the firm’s chief executives, and instead under the control of the company’s auditing board. More so, the chosen auditors are supposed to report their finding to the firm’s board, and not to chief executives. Additionally, the SOX has in it is a requirement for the company buys and installs the effective internal control software, while at the same time, conducting am an elaboration, on how it is supped to work. More so, organizations are required to do a regular review on how they are performing, failure to which they are to pay hefty fines for taking part in fraudulent actions (Rezaee, 2014).
