1.12 Consideration of fraud

Question 1

Which standard applies to the consideration of fraud in financial statement audit

Answer 1

AU-C 240

Question 2

What does AU-C240 Consideration of fraud in the financial statement audit standard require the auditor to perform

Answer 2

Understand the nature and characteristics of fraud

Hold a brain storming session with engagement staff to discuss the RMM due to fraud

Obtain information needed to identify RMM due to fraud

Evaluate results of analytical procedures performed in planning the audit

Identify factors that represent the risk material miss statement

Determinate your timing in extent of procedures needed to respond to the results of this assessments

Evaluate the audit evidence obtained

Communicate knowledge or suspicion of fraud to management and governance on a timely basis

Question 3

How does an auditor obtain information needed to identify risk of material miss statement due to fraud

Answer 3

Inquiry of management about knowledge or suspicion of fraud

Evaluations results of analytical procedures performed in the planning of the audit

Consider fraud risk factors

Consider other information

Question 4

How can an auditor identify risk that may result in a material the statement to the financial statements Do you to

Answer 4

Evaluates information considering size complexity and ownership attributes of the entity

Evaluate information as to pervasiveness of fraud risk factors is how they affect the financial statements

Apply professional judgment in the consideration of the type of risk Magnitude and likelihood that the risk will result in a material miss statement

Question 5

___________ Is a common way that financial statements are fraudulently missed stated through overstatement of revenue

Auditors are required to presume that it represents a risk of material miss statement

Answer 5

Revenue recognition

Question 6

How are risks evaluated

Answer 6

Auditor considers whether controls mitigate identified risk

Question 7

What changes in nature timing and extent can occur after fraud assessments

Answer 7

Overall with the audit is conducted

Nature of procedures to obtain more reliable evidence

Perform procedures in recognition of the risk of management override of controls
Ex Exhibit journal entries in other adjustments

Question 8

How does the author evaluate the audit evidence obtained misstatement due to fraud

Answer 8

Evaluate results of analytical procedures

Evaluate accumulator results of procedures

Consider if I did if I miss statements may be indicative of fraud even if not material implications should be considered

If material additional evidence should be obtained
When risk is very high auditor may consider withdrawing from engagement

Question 9

When is the auditor required to communicate suspicion of fraud

Answer 9

To management and governance on a timely basis

Question 10

Requirements of communication when fraud is suspected

Answer 10

Evidence of existence should be communicated to management

Governance should be informed when it involves senior management in from resulting in a material list statement

Discuss with at least one level above those involved

Internal control risk implications communicated if significant deficiencies or material weaknesses

Disclosure to third parties may be appropriate

Question 11

Requirements to document the consideration of fraud

Answer 11

Brainstorming session

Procedures performed to obtain information

I identified risk of material miss statement

Reasons revenue recognition was not considered a fraud risk factor if appropriate

Results of procedures performed in response to risk of management override of controls

Other factors that cause the auditor to conclude that additional procedures required

The nature of communication about fraud