...including reporting lines, and appropriate authorities and responsibilities, Commitment to attract, develop, and retain competent employees, and Holding employees accountable for internal control responsibilities. 2. Risk Assessment: Risk assessment is management's process for identifying, analyzing, and responding to risks from internal and external sources that threaten their ability to meet objectives in the areas of operations, reporting, and compliance. In performing effective risk assessment, organizations should: Clearly specify objectives to allow the identification and assessment of risks related to those objectives, Identify and analyze risks to the achievement of its objectives to determine how they may be managed, Consider potential fraud...
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...CHAPTER 19 Fraud Awareness Auditing LEARNING OBJECTIVES | | | | | | |Review Checkpoints |Exercises Problems |Cases | | | | | | |1. Define and explain the differences among several kinds of fraud, |1, 2, 3 |45, 46 | | |errors, irregularities, and illegal acts that might occur in an | | | | |organization. | | | | | | | | | |2. Explain the various auditing standards regarding external, internal, |4, 5, 6, 7, 8 | | | |and governmental auditors' responsibilities with respect to detecting | | | | |and reporting errors, irregularities, and illegal...
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...Test 3 Chapter 11 1. Fundamental Concepts and Characteristics of Fraud a. Evaluation of the auditor’s fraud detection responsibilities b. Treadway Committee Report findings c. Who commits fraud and why? 2. The Auditor’s Responsibility for Detecting and Reporting upon Fraud (AU 316) a. Misstatements arising from fraudulent financial reporting – Fraud for the Entity b. Misstatements arising from misappropriation of assets – Fraud against the Entity c. The overall process: i. Identify client fraud risk areas ii. Consider client anti-fraud programs and controls iii. Respond to results of the fraud risk assessment d. Responding to misstatements identified in the audit i. Effects, if due to fraud, likely immaterial ii. Effects, if due to fraud, could be material e. Detection and reporting responsibilities within the client organization – how do we respond to fraud internally f. Responsibilities for reporting fraud to outsiders – is the same criteria for reporting fraud externally as we had to do with illegal acts. g. Audit documentation responsibilities h. Typical fraud warning signs and red flags (AU 316.85) – they are arranged by 3 elements that typically exist in some kind of combination of fraud. AU 316.85 “Examples of Fraud Risk Factors. Separately presented are examples relating to the two types of...
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...internal financial reporting integrity. This audit committee would oversees the audits, both internal and external. Once found evidence of fraudulent accounting, external auditors must communicate the findings within Apollo with the committee or other governing body. External auditors also report the effect that the fraud may result with Apollo. We would plan and conduct our audit with professional skepticism. We are required to recognize the condition or events that suggest if fraud may exist. Based on the audit risk assessment we conduct, we develop audit procedures to obtain reasonable assurance that substantial frauds have been found. It is expected that the auditor to implement procedures that will lead to the discovery of errors or fraud without significant impact on the financial statements can not be held responsible for undetected such irregularities. The auditor should communicate with the management of his client. He should ask the management information concerning any significant fraud or error has been detected in order to detect key problems that could lead to certain activities, the implementation of audit procedures more than usual However the auditor faces the risk inevitable that some significant errors to be detected, even if the audit is planned and done properly. Type accounting fraud The most common type of fraud, the audit found that revenue recognition errors. Revenue recognition is the earnings report, the company's revenue. Some companies may incorrectly...
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...internal financial reporting integrity. This audit committee would oversees the audits, both internal and external. Once found evidence of fraudulent accounting, external auditors must communicate the findings within Apollo with the committee or other governing body. External auditors also report the effect that the fraud may result with Apollo. We would plan and conduct our audit with professional skepticism. We are required to recognize the condition or events that suggest if fraud may exist. Based on the audit risk assessment we conduct, we develop audit procedures to obtain reasonable assurance that substantial frauds have been found. It is expected that the auditor to implement procedures that will lead to the discovery of errors or fraud without significant impact on the financial statements can not be held responsible for undetected such irregularities. The auditor should communicate with the management of his client. He should ask the management information concerning any significant fraud or error has been detected in order to detect key problems that could lead to certain activities, the implementation of audit procedures more than usual However the auditor faces the risk inevitable that some significant errors to be detected, even if the audit is planned and done properly. Type accounting fraud The most common type of fraud, the audit found that revenue recognition errors. Revenue recognition is the earnings report, the company's revenue. Some companies may incorrectly...
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...AUDITING PROFESSIONAL 1 EXAMINATION - AUGUST 2011 NOTES: Section A - You are required to answer Questions 1, 2 and 3. Section B - You are required to answer any two out of Questions 4, 5, 6 and 7. (If you provide answers to more than two questions in this section, you must draw a clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first answers to hand for these four questions will be marked.) TIME ALLOWED: 3 hours, plus 10 minutes to read the paper. INSTRUCTIONS: During the reading time you may write notes on the examination paper but you may not commence writing in your answer book. Marks for each question are shown. The pass mark required is 50% in total over the whole paper. Start your answer to each question on a new page. You are reminded that candidates are expected to pay particular attention to their communication skills and care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of your answers and the extent to which answers are supported with relevant legislation, case law or examples, where appropriate. List on the cover of each answer booklet, in the space provided, the number of each question(s) attempted. The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2. THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND AUDITING PROFESSIONAL 1 EXAMINATION - APRIL 2011 Time Allowed: 3 hours, plus 10 minutes to read the paper...
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...will be ultimately settled through the cash accounts, the audit of cash accounts also assists in the verification of other asset and liability accounts as well as revenue and expenses. Some of the investor relies on the accuracy of the cash account to evaluate the financial health of the company. They use current asset which include the cash account to compute several financial measures. Other than that, cash is the highly liquid asset in a company and it is an area of high inherent risk since there is a relatively high risk of misappropriation. Part b (ii): For each audit procedure listed in the audit program (Schedule C 2), indicate the primary assertion(s) assessed by the procedure. 1. Obtain Cutoff Bank Statements and Confirmations returned by the bank, scan and review. It classified as assertions about account balances at period end under...
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...ASSIGNMENT 1: REVIEW OF BUSINESS FRAUD ABSTRACT Business fraud is a white-collar crime that is increasing at a rapid pace. One case of business fraud dealt with an information breach within Bank of America’s information system. This breach affected over 300 Bank of America customers. Management failed to provide proper security for their information system and the sensitive information of their customers. The following assignment will give detailed specifics about the case, clarify the classification of this particular fraud, and suggest recommendations that can help prevent this fraud from reoccurring. ASSIGNMENT 1: Review of Business Fraud On May 24, 2011, an investigation was in process within the Bank of America organization for potential business fraud. A Bank of America employee had manage to copy the personal information of over 300 of the bank’s customers. The security breach allowed the Bank of America employee to communicate the sensitive information of the customers to a ring of scammers. Customer information compromised included the customers’ names, physical addresses, Social Security numbers, contact numbers, checking account numbers, savings account numbers, routing numbers, driver's license numbers, date of births, email addresses, mother's maiden names, PINs and the balances on their accounts. Scammers used this information to start up credit cards and to spend the money available on the customers’ bank accounts. The leaking of the confidential...
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...Fraud Examination Cendant Case 1a. It is the auditor’s responsibility to provide reasonable assurance that the financial statements are free of material misstatement. Related parties make important decisions based on information provided in financial statements, so the auditor has a responsibility to plan and perform the audit accordingly in order to obtain reasonable assurance that the financial statements are reported fairly. b. The two main categories of fraud affecting financial reporting are fraudulent financial reporting and misappropriation of assets. Misappropriation of assets typically involves the theft or embezzlement of a company’s assets by an owner, manager, or employee of the company. Fraudulent financial reporting occurs by intentionally misstating or omitting important items from the financial statements. Financial reporting fraud is what occurred in the Cendant case. CUC’s management inflated earnings by recording fictitious revenue or reduced expenses in order to meet earnings expectations. c. One factor the auditors should consider when assessing the likelihood of fraud is whether the corporation has any incentives or pressures to commit the fraud. In order to have the opportunity to merge or acquire other companies, CUC needed to meet their earnings expectations. This could have been a sign to the auditor’s that CUC had a reason to inflate their revenues. Another factor to consider is whether there are opportunities to commit a fraud. CUC made various...
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...Accounting is considered as the major helping hand to form a successive management which needs to report and analyse the business transactions. Accounting is a pathway of measuring success through the designing projects as measuring the outcomes of the projects in line with the target goal of the organisations (Elliot, Barry & Elliot, Jamie, 2004). Organisations maintain their financial reports with the help of accounting theories and policies. The international financial reporting standards also help to keep the accounting practice effectively, efficiently, and correctly. The efficient management will be built if the organisation follows the international reporting standards accurately. As a mandatory course unit of myself I need to prove my understanding about the financial systems and auditing through this report. I will gradually demonstrate my understanding on the purpose, use, importance of accounting records, accounting systems, computerised accounting system, manual accounting systems, business risk, audit risk, internal and external control systems, importance of auditing, and planning audit assignment as well as preparing audit report in the body part of my report. Task One Purpose and Use of Different Accounting Records Accounting records represents the management of all source of information in different records books. These records are ledger, journals, bank statements, adjusting journals, statement verification, invoice, brochure, and etc. The purpose and...
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.... . . . . . . . . . . . 25 2.2 2.3 2.4 Dell Computer Corporation Evaluation of Client Business Risk Flash Technologies, Inc. Asher Farms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Risk Analysis and Resolution of Client Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Understanding of Client’s Business Environment s e ct ion 3 Professional and ethical issues . . . . . . . . . . . . . . . . . . . . . . . 59 S o l u tio nS inc lu de d in t h iS Section 3.1 3.2 3.3 3.4 3.5 A Day in the Life of Brent Dorsey Staff Auditor Professional Pressures Nathan Johnson’s Rental Car Reimbursement Solving Ethical Dilemmas–Should He Pocket the Cash? Recognizing It’s a Fraud and Evaluating What to Do . . . . . . . . . . . . . . . . 63 The Anonymous Caller WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 The Story of a Whistleblower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79...
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...the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] | In the case of Koss Corporation vs. Sachdeva and Grant Thornton, Koss Corporation, the plaintiff, alleges Sacheva, its former Vice President of Finance, committed fraud and embezzlement of company assets and Grant Thornton failed to properly conduct its audits and failed to disclose numerous accounting irregularities at Koss. Plaintiff Koss is a publicly traded company listed on the NASDAQ with its principal place of business in Milwaukee and Wisconsin. Currently, Koss mainly designs, manufactures and markets high-fidelity headphone products all over the world. Defendant SujataSachdeva was employed as former Vice President of Finance and was responsible for the day-to day operation of the company’s accounting department and accounting operations. As an officer of the company, Sachdeva was entrusted with numerous important fiduciary duties. However, she took advantage of her position to embezzle Koss’s assets of over thirty million dollars to cover her personal expense. Defendant Grand Thornton is one of the largest accounting firms in the United States. It was hired to serve as an independent auditor for Koss during fiscal year 2004 through 2008. However, Grand Thornton was sued into court because it failed in its fiduciary role by issuing false audit opinions during this period. The negligence, carelessness and reckless auditing...
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...Task 1 Introduction: Auditing is an accounting system which is used in business. It made by an independent group or body to examine a business' financial transactions and statements. The only purpose of auditing is to present an accurate account of a company's financial business transactions. This practice is used for companies to make sure that they are trading financially fairly and also that the accounts they are presenting to the general public or shareholders are true and justified. These financial auditing results can be presented to shareholders, banks and anyone else with an interest in the company. One of the main reasons for a financial audit is to ensure that the company is not making any fraud. This is why the financial auditing body should be an independent third party. AR = Audit risk: is the risk that the auditor will incorrectly issue an unqualified opinion. IR = Inherent risk: is the risk of material misstatements absent any internal controls or testing. CR = Control risk: is the risk that internal controls will fail to prevent or detect material misstatement. DR = Detection risk: is the risk that audit tests will fail to detect material misstatement. i) In this planning of the audit, the three audit areas which appear to have high inherent risk in my opinion are: 1. Sales system: Gala restaurant is owned by husband and wife, and each of them has a 50% of the company share and they are both directors of the company, Gala has been making good sales...
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... 16 a) As the auditor, describe the concerns you have that may suggest fraud is occurring in the company. The Fraud Triangle ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley The fraud triangle originated from Donald Cressey's hypothesis (Donald R. Cressey, 1973). The fraud triangle is a model for explaining the factors that cause someone to commit occupational fraud (acfe, n.d.). Type of fraud: Management fraud Fraudulent financial reporting Misappropriation of assets. (Arens/Elder/Beasley, 2012) ©2012 Prentice Hall Business Publishing, Auditing 14/e, Arens/Elder/Beasley At the types of fraud, usually the Management fraud are including fraudulent financial reporting and the misappropriation of assets. Why the company will occurs the fraud, because the employees and managers have incentive, opportunities and attitude. The fraud specific fraud risk area are including revenue and accounts receivable fraud risk, inventory, purchases and other area Management fraud Management fraud, as the name suggests, is perpetrated by the top management of a company who has the intention of misleading investors (Dutta, 2013). Usually management fraud by accounting manipulation and misstates the...
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...Chapter 1: Assurance services: 认证业务 Independent professional services that improve the quality of information for decision makers. Attestation services: 鉴证服务 A type of assurance service in which the public accounting firm issues a written communication that expresses a conclusion about the reliability of a written assertion of another party. Audit of historical financial statements: A form of attestation services, the auditor issues a written report expressing an opinion about whether the F/S is in material conformity (一致) with accounting standards. e.g.: listed company must provide shareholders with annual financial statements that are audited by an independent accounting firm. Review of historical cost financial statements: A form of attestation services, a public accounting firm issues a written report that provides less assurance than an audit as to whether the financial statements are in material conformity with accounting standards. Auditing standards: Establish mandatory (强制) requirements and provide explanatory (解释) guidance to auditors in fulfilling their professional responsibilities in the audit of financial reports. Auditing: Is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be performed by a competent, independent person. Compliance audit: 合规性审计 One of three primary types of audits, a review of an organization’s financial records...
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