Fraud

Question 1

What are the two types of fraud?

Answer 1

Fraudulent financial reporting

Misappropriation of assets

Question 2

What is Fraudulent Financial reporting?

Answer 2

occurs at the management level through intentional omissions or manipulation of amounts or disclosures with the intention of deceiving users and stakeholders.

Question 3

What is misappropriation of assets?

Answer 3

usually occurs at the employee level in relatively small amounts.

Question 4

What is Fraud?

Answer 4

deliberate misrepresentation and the concealment of information. It is an intentional act involving the use of deception to obtain an unjust or illegal advantage.

Question 5

What are the 3 pillars of Fraud?

Answer 5

1. Incentives and pressures
2. Opportunity
3. Rationalization and attitude

Question 6

What is the audit response to suspected or identified fraud?

Answer 6

RE-evaluate the assessed RMM

Consider if there is collusion among employees and the reliability of the evidence obtained

communicate these matters on a timely basis to management to inform those with primary responsibility for the prevention and detection of fraud of matters related to their responsibility.

Check if legal responsibilities exist that override confidentiality to client to report to third party

Question 7

Audit response to Fraud Risk?

Answer 7

Similar to increased RMM at OFSL and assertion level.

Question 8

What are the auditor Responsibilities relating to fraud?

Answer 8

• to identify and assess the risks of material misstatement of the financial statements due to fraud
• to obtain sufficient appropriate audit evidence regarding the assessment of risks of material misstatement due to fraud through designing and implementing appropriate responses
• to respond appropriately to fraud or suspected fraud identified during the audit

Question 9

What CAS addresses Fraud?

Answer 9

CAS 240