Answered: Describe some of the motives and…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance

Section: Chapter Questions

Problem 7RQSC

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Describe some of the motives and mistakes made by the financial engineers?

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Step 1

Motives of financial engineers are discussed as follows:

Financial engineers use quantitative models to find the mispricing in the market and making Profit out of that model made.
Engineers mix the use of finance as well as computer science and make a model that helps to mitigate the financial risk of the company.
Engineers develop algorithms that are useful in derivatives trading and it can lead to huge profits because of the fast execution due to the algorithms made.

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