Solved

At the Suggestion of the External Auditors, the Audit Committee

question 1

Multiple Choice

At the suggestion of the external auditors, the audit committee of Alpha Technologies called in Bryce Miller, CFE, to investigate some suspected improprieties. During his investigation, Bryce learns that the company has been involved in several highly-complex transactions with related parties that do not appear to have any logical business purpose. Further, Alpha's organizational structure is overly complex and involves some unusual legal entities with overlapping lines of authority. Bryce also discovers four large bank accounts in the Cayman Islands that have no clear business justification. When questioned about these situations, the company's CEO treats them as unimportant and refuses to provide any further explanation. What type of financial statement fraud scheme do Bryce's findings most likely indicate?

Definitions:

Progressive Tax

A tax system where the tax rate increases as the taxable amount or income increases, placing a larger burden on those who have the ability to pay more.

Federal Income Tax

A charge imposed by the US federal government on the yearly income of persons, companies, trusts, and various legal bodies.

Excise Tax

A tax on the sale or consumption of a specific product or service, often levied at the point of manufacture or sale.

Taxable Income

is the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year.