Ch 14 - Fraud Risk Assessment

Question 1

What are the 4 factors that influence fraud risk?

Answer 1

1. Nature of the business
2. Operating Environment
3. Effectiveness of Its internal control
4. Ethics & values of the Company and people within it

Question 2

What is Fraud Risk Assessment?

Answer 2

A process aimed at proactively identifying and addressing an organization’s vulnerabilities to internal and external fraud.

Question 3

What is the “Top-Down, Risk-Based Approach”?

Answer 3

Having more controls surrounding higher-risk areas

Question 4

How often does fraud risk assessment need to be conducted?

Answer 4

Continuously due to address changes, operating environment, employees, technology, etc.

Question 5

What are residual fraud risks?

Answer 5

Fraud risks that remain after attempts to mitigate them, usually as a result of ineffective or nonexistent controls.

Question 6

True or False:

Both management and auditors have responsibility for fraud risk assessment.

Answer 6

True

Question 7

What action might management take in order to transfer a residual fraud risk?

Answer 7

Purchase fidelity insurance

Question 8

What is the framework used by most public companies for fraud risk assessment?

Answer 8

COSO - Committee of Sponsoring Organizations of the Treadway Commission