Detecting Fraud

Question 1

two types of fraud

Answer 1

fraudulent financial reporting

misappropriation of assets (theft)-false entries to conceal theft of goods. indicator would be if employees have negative relationship. opportunities would be bad internal controls. attitutudes is employee lifestyle changed quickly.

Question 2

fraud risk factors (fraud triangle)

Answer 2

incentive/pressure - generating losses, economic pressure

opportunity-unnecessarily complex transactions, subjective areas on financial statements, ineffective monitoring of management, bad internal controls

attitude rationalization-lack of commitment(tone at the top) to enforce ethical standards

Question 3

consideration of fraud is a _____ and not limited to audit planning

Answer 3

continuing process

Question 4

address management override of internal control

Answer 4

examine adjusting journal entries
especially nonstandard entries
especially those at end of period
evaluate estimates for bias-perform a retrospective review
examine authorization for unusual transactions (evaluate the business purpose)