Fraud-Handout

Auditing and Assurance Services

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Fraud Risk Learning Objectives Understand differences among several types of fraud,  Understand auditors’ responsibility for detecting fraud Understand the fraud risk triangle
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What is fraud? Fraudulent financial reporting  Misappropriation of assets
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acts? Errors  Management Fraud Direct-effect illegal acts Indirect-effect illegal acts
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What are the auditors’ responsibilities? o What are the expectations of an auditor? o What is required?
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Steps in addressing fraud 1. Audit team discussion (“brainstorming”) 2. Obtain Information to Identify Risks 3. o Identify Fraud Risk Factors o Assess Fraud Risk 1. Respond to Assessed Risks 2. Evaluate Audit Evidence 3. Communicate  4. Document
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Step 1:  Audit team discussion (“brainstorming”) Required procedure Objectives o Gain understanding of Previous experiences with client How a fraud might be perpetrated and concealed in  the entity Procedures that might detect fraud o Set proper tone for engagement Discussions should be ongoing throughout the  engagement
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Step 3a:  Identify Fraud Risk Factors
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Step 4: Respond to Assessed Risks Overall effect on audit o Assignment of personnel o Choice of accounting principles o Predictability of auditing procedures o Examination of journal entries and other adjustments o Retrospective review of prior year accounting  estimates Extended procedures
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Evaluate Audit Evidence Discrepancies in the accounting records. Conflicting or missing evidential matter. Problematic or unusual relationships between the auditor  and management.
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Fraud-Handout - FraudRiskLearningObjectives

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