Assignment 6-2 Week 6 Discussion Issues

Assignment 6-2 Week 6 Discussion Issues - ACCT341 February...

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ACCT341 February 6, 2012 Week 6 Discussion Issues Assignment 6-2 Chapter 13 13-1. How is fraud risk influenced by a company’s internal control? How is fraud risk influenced by a company’s ethics, values, and expectations? A good system of internal controls, with the right balance of preventive and detective controls, can greatly reduce an organization’s vulnerability to fraud. - Preventive controls: are those manual or automated processes designed to stop an undesirable event from occurring. - Detective controls: can also be manual or automated, but are designed to identify an undesirable event that has already occurred. An organization that is clear and consistent about its ethics, values, and expectations will reduce the potential fraudster’s ability to rationalize his actions. An organization that demonstrates consistency and predictability in how it handles and holds accountable employees who engage in unacceptable behaviors can significantly reduce its risk of fraud. (Page 344) 13-2. Why is it important that management and auditors collaborate on a fraud risk assessment? Both management and auditors have a responsibility for fraud risk management. Each of these parties has a unique knowledge and perspective of the fraud risks faced by the organization. Management has intricate familiarity of day-to-day business operations, responsibility for assessing business risks and implementing organizational controls, authority to adjust operations, influence over the organization’s culture and ethical atmosphere, and control over the organization’s resources. Auditors, conversely, are trained in risk identification and assessment, and have expertise in evaluating internal controls, which is critical to the fraud risk assessment process. (Page 347) 13-4. Green is an internal auditor and the lead on the company’s fraud risk assessment. In the past, he and Blue, an accounts receivable clerk, have had several heated disagreements over accounting procedures. What risk would Green be taking by having Blue perform the
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Assignment 6-2 Week 6 Discussion Issues - ACCT341 February...

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