1. Are auditors responsible for searching for fraud while reviewing a public companys quarterly financial statements? Explain. If so, what specific fraud risk factors should the Grant Thornton auditors have considered while performing their review of Bankrates financial statements for the second quarter of 2012?
2. Define the phrase earnings management and distinguish between earnings management and fraudulent accounting. Under what circumstances, if any, is it acceptable for corporate executives to employ earnings management tactics? Explain.
3. What are the key factors that should be considered in determining whether a financial statement amount is material? Should auditors apply the same materiality guidelines or benchmarks as financial accountants? Defend your answer.
4. Identify the primary audit objectives for an accrued liability account such as Bankrates SEM accrual. What circumstances relevant to accrued liabilities can prove to be particularly challenging for auditors?
5. Assuming that the SECs allegations are true, the parties principally responsible for the Bankrate fraud were DiMaria, Gamsey, and Lerner. What other parties bear some degree of responsibility for the fraud? Defend your answer.