Lecture Notes Ch. 11 (ACCT-422)

Lecture Notes Ch. 11 (ACCT-422) - Chapter 11 Fraud Auditing...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 11 Fraud Auditing We were introduced to the concept of fraud in Chapter 6 in the context of the auditor’s responsibility with respect to detecting fraud. This chapter expands upon that introduction by discussing in some detail the responsibilities placed upon auditors to detect material misstatements due to fraud, as set forth in the relatively recently issued SAS 99/ AU 316. You can find SAS 99 as well as other SAS’s on the AICPA’s website at www.aicpa.org . This chapter also discusses the fraud risk factors and the auditor’s assessment of that risk. As discussed in Chapter 6, there are two types of fraud: fraudulent financial reporting and misappropriation of assets. Fraudulent financial reporting is an intentional misstatement or omission of amounts or disclosures with the intent to deceive users. Misappropriation of assets is fraud that involves theft of an entity’s assets. Fraudulent financial reporting may involve either the overstatement of assets and income or omission of liabilities and expenses to overstate income, or an attempt to understate income for purposes of reducing income taxes or smoothing out income. Fraudulent financial reporting is generally committed by top management whereas misappropriation of assets is generally committed by lower level employees. SAS 99 and the text set forth 3 conditions that generally are present when fraud occurs, whether that fraud is fraudulent financial reporting or misappropriation of assets: 1. Incentive/Pressures – management or other employees have incentives or pressures to commit fraud. 2. Opportunities – circumstances provide opportunities for management or employees to commit fraud such as an absence of internal controls or an ability of management to override controls. 3.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Lecture Notes Ch. 11 (ACCT-422) - Chapter 11 Fraud Auditing...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online