Q1 - A nonprofit organization is having its annual board meeting and they are reviewing their audited financial statement. One of the board mentions that he is concerned about adhering to the rules of Sarbanes - Oxley, and specifically the rules for officers signing that they are responsible for the financial statements and that there should be adequate internal control. Another board member says that none of the SOX rules applies to nonprofit organizations. Who is right and fully explain in your answer.

q2 - Mr. Big of The Big Big Company sees that sales will miss the projected sales volume for the year that the company made public to wall street gurus. Fearing that the stock will go down in price if the company issues statements that miss the projected volume Mr. Big asks his sales department (not the accounting department) to help make the "numbers" before the close of the year. The sales department tells Mr. Big that because of Covid their customers do not need to order more product at this time. Mr. Big tells them to get "creative" and "make it happen". What does the sales department do to generate the sales that they need.

• Describe one way where the sales department gets the cooperation from customers to generate sales invoices. How, or why, is this a management fraud?
• Describe one way where the sales invoices are generated without the cooperation from customers and the customers don't even know. How, or why, is this a management fraud?

q3 - When performing a horizontal trend analysis of two companies, an auditor notices the following ratios:

Gross profit percentage Company A yr 1= 30.2%, yr 2 = 30.9% yr 3 = 30.1%

Company B yr 1 = 32.5%, yr 2 = 29.2%, yr 3= 32.0%

The industry average for these years was 29.4%.

Which company displays more of a red flag for fraud than the other? Explain, and can you name the type of management fraud we auditors call this type of financial statement fraud?