Essay on 413 ass 4

Fraud is a broad legal concept and auditors do not make legal determinations of whether fraud has occurred. Rather, the auditor's interest specifically relates to acts that result in a material misstatement of the financial statements. The primary factor that distinguishes fraud from error is whether the underlying action that results in the misstatement of the financial statements is intentional or unintentional. Fraud is an intentional act that results in a material misstatement in financial statements that are the subject of an audit. Misstatements arising from fraudulent financial reporting are intentional misstatements or omissions of amounts or disclosures in financial statements designed to deceive financial statement users where the effect causes the financial statements not to be presented in conformity with generally accepted accounting principles. Financial stability or profitability in The Hershey Company can be threatened by economic, industry, or entity operating conditions. These harmful conditions may include a high degree of competition or market saturation, rapid changes in technology or interest rates, significant declines in customer demand, operating losses making the threat of bankruptcy possible, or an inability to generate cash flows from operations while reporting earnings and earnings growth. There is excessive pressure for management to meet the financial requirements or expectations of third parties despite these threats. The expectations of investors are sometimes unrealistic and overly optimistic. A possible reason for the overly optimistic goals is that the investors' personal financial situation is also threatened by the entity's financial performance. Financial targets set up by the board of directors or investors usually includes, but is not limited to sales and profitability goals. Statements by management regarding the absolute need to meet operating and financial targets can create undue pressures that may lead employees to commit fraud to achieve them. Setting unachievable goals for employees can give them two unattractive choices: fail or cheat. If management faced these tremendous pressures regarding the entity’s financial performance, opportunities might exist for them to engage in fraudulent financial reporting. The opportunities to engage in fraudulent financial reporting can result from several factors. These factors involve relevant transactions not in the ordinary course of business, assets, liabilities, revenues, or expenses based on significant estimates that involve personal judgments or uncertainties that are difficult to validate, unusual or highly complex transactions, especially those close to period end, significant operations located or

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