After investigating financial statement frauds, the U.S. Securities and Exchange Commission (SEC) issues Accounting and Auditing Enforcement Releases (AAERs). When frauds are revealed, auditors are often implicated for failing to discover that the F/S were materially misstated. In many cases, information indicating high FFR risk existed, requiring the auditors to design and perform the engagement to appropriately respond to those risks via the scope of substantive tests. In this assignment, you will analyze the SEC Complaint against Arthur Knapp, the CFO of OCZ Technologies Group, Inc. (attached) Requirements: [1] Company & Fraud Risk Factors (10 points) Briefly describe the company and industry at the time of the fraud. Then, discuss factors you believe were important to the auditors assessment of FFR risk for the OCZ audit. [2] Fraud & F/S Accounts/Assertions Affected (15 points) Briefly summarize all fraud techniques employed at OCZ and identify the accounts misstated. Discuss the specific F/S assertions affected for each account and explain why those assertions were affected. [3] Significant Risks of Material Misstatement (5 points) Consider the accounts affected by the fraud. Do you believe the auditors likely judged all the accounts manipulated as having significant risks of material misstatement when planning the audit? Explain. Discuss in 2-3 pages.
