28. Explain how the focus differs for auditors and systems developers. Auditors are interested in “verifying” the financial statements. They work with the existing system. Developers, on the other hand, are interested in creating and maintaining the system that produces the financial statements.
32. Should internal controls prevent financial statement fraud? Explain your answer. Yes. They should prevent financial statement fraud in the sense of making it less likely, but they can’t absolutely prevent any particular fraud.
34. Are corporate ethics codes effective in preventing improper employee behavior? Explain your answer. Codes of ethics can be helpful but are not a cure all. Ethics codes are most helpful when they exist as part of an ethics-conscious corporate culture. If the corporate culture supports unethical behavior, then an ethics code is likely to be of little help. Further, to be effective an ethics code must be supported by employee training and awareness.
37. To whom should the internal auditor report? Why?
The internal auditor should report directly to the audit committee. This makes the internal auditor independent of the corporate officers, including the controller.
51. Arexl Media Company owns several radio stations in the Chicago area. Most of Arexl’s revenues come from on-the-air advertising, and some revenues come from banner advertising on Arexl’s Web site. Alexl has an office staff consisting of five persons: an office manager, a secretary, a sales manager, a marketing manager, and a general manager. Liliana Byrd, Arexl’s, office manager, opens the mail each day and then does the following: • Immediately separates any account payment checks from clients. She places the checks in the company safe until the end of the week. • On Friday each week, she...