audit fraud & error p7
TRANSCRIPT
Fraud v Error
Fraud v Error
Intentional
Fraud v ErrorIntentional
Fraud v ErrorIntentional
Misinterpretation
Fraud v ErrorIntentional
Misinterpretation
Fraud v ErrorIntentional
Misinterpretation
Incorrect Accounting
Fraud v ErrorIntentional
MisinterpretationIncorrect Accounting
Fraud v ErrorIntentional
MisinterpretationIncorrect Accounting
There may be requirements to report suspicions of fraud, but not error
Management v Auditor
Management v Auditor
Prepare T&F
Management v AuditorPrepare T&F
Management v AuditorPrepare T&F
Prevent & Detect Fraud
Management v AuditorPrepare T&F
Prevent & Detect Fraud
Management v AuditorPrepare T&F
Prevent & Detect Fraud
Internal Controls
Management v AuditorPrepare T&F
Prevent & Detect Fraud
Internal Controls
Good Corporate Governance
Management v Auditor
Management v Auditor
Report on T&F
Management v AuditorReport on T&F
Management v AuditorReport on T&F
Reasonable Assurance Fraud & ERROR
Management v AuditorReport on T&F
Reasonable Assurance Fraud & ERROR
Management v AuditorReport on T&F
Reasonable Assurance Fraud & ERROR
Primary F&E responsibility lies with management
Management v AuditorReport on T&F
Reasonable Assurance Fraud & ERROR
Primary F&E responsibility lies with management
consider the risk of material misstatement
Management v Auditor
Management v Auditor
Reduce fraud opportunities
Management v Auditor
Reduce fraud opportunities
Establish a culture where no fraud
Management v Auditor
Reduce fraud opportunities
Establish a culture where no fraud due to the likelihood of detection
Professional Scepticism
Professional Scepticism
Discuss fraud within specific characteristics of the audit & potential effect on FS
Professional Scepticism
Discuss fraud within specific characteristics of the audit & potential effect on FS
Professional Scepticism
Discuss fraud within specific characteristics of the audit & potential effect on FS
Talk to management about controls to detect or
prevent fraud
Professional Scepticism
Discuss fraud within specific characteristics of the audit & potential effect on FS
Talk to management about controls to detect or
prevent fraud
Obtain evidence that fraud has not occurred or detected and corrected
Fraud/Error is Suspected?
Fraud/Error is Suspected?
Fraud/Error is Suspected? Effect on FS?
Fraud/Error is Suspected? Effect on FS?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagement
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
ConsiderReportImpact
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
ConsiderReportImpact
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
ConsiderReportImpact
Report toAuthorities?
Fraud/Error is Suspected? Effect on FS?
Document in Audit files
AdditionalTesting?
Extent of misstatement
Effect onRisk?
Discuss withManagementTell them to get
legaladvice if fraud is
suspected
If ManagementSuspected?
Get legal advice or rarely resign
ConsiderReportImpact
Report toAuthorities?
Consider Confidentiality
The Auditor - Criminal Liability
The Auditor - Criminal Liability
Accepting appointment without being qualified
The Auditor - Criminal Liability
Accepting appointment without being qualified
Being involved with fraud
The Auditor - Criminal Liability
Accepting appointment without being qualified
Being involved with fraud
Insider Dealing
The Auditor - Criminal Liability
Accepting appointment without being qualified
Being involved with fraud
Insider Dealing
Money Laundering
The Auditor - Civil Liability
The Auditor - Civil Liability
Negligent (careless) auditing
The Auditor - Civil Liability
Negligent (careless) auditing
Sued by Client company under contract law
The Auditor - Civil Liability
Negligent (careless) auditing
Sued by Client company under contract law
Sued by banks etc under negligence
The Auditor - Duty of skill & Care
The Auditor - Duty of skill & Care
Depends on the circumstance
The Auditor - Duty of skill & Care
Depends on the circumstanceeg. Accepting the word of management after
suspicion is aroused
The Auditor - Duty of skill & Care
Depends on the circumstanceeg. Accepting the word of management after
suspicion is arousedFollow ISAs and show this in working papers
The Auditor - Professional competence
The Auditor - Professional competence
Achieve, and maintain, professional knowledge
The Auditor - Professional competence
Achieve, and maintain, professional knowledge
eg. Formal & Informal training + experience
The Auditor - Professional competence
Achieve, and maintain, professional knowledge
eg. Formal & Informal training + experience
Awareness of general business developments,such as dropbox and e-commerce
The Auditor - Due care
The Auditor - Due care
Acting diligently in accordance with technical and professional standards
The Auditor - Due care
Acting diligently in accordance with technical and professional standardsmeans applying knowledge minimising the chance of mistakes
being made
The Auditor - Due care
Acting diligently in accordance with technical and professional standardsmeans applying knowledge minimising the chance of mistakes
being made
Enough time to complete work with due careStaff fully understand the objectives
The Auditor - Negligence - A Civil Wrong
The Auditor - Negligence - A Civil Wrong
Duty of Care
The Auditor - Negligence - A Civil Wrong
Duty of CareDuty is broken
The Auditor - Negligence - A Civil Wrong
Duty of CareDuty is brokenDamage results
The Auditor - Negligence - A Civil Wrong
Duty of CareDuty is brokenDamage results
The auditor does not exist to aid investment decisions, unless verbal assurances given
Fraudulent Financial Reporting
Fraudulent Financial ReportingIntentional
Misstatement!
Fraudulent Financial Reporting
Fraudulent Financial Reporting
Manipulation
Fraudulent Financial Reporting
ManipulationMisrepresentation
Fraudulent Financial Reporting
ManipulationMisrepresentation
Misapplication
Fraudulent Financial Reporting
ManipulationMisrepresentation
Misapplication
Earnings Management