Error, Fraud, NOCLAR Flashcards
Misstatements may come from
- fraud
- error
- NOCLAR
What is the difference between fraud and error?
intent
Fraud, being the one with intent, should be more focused on the audit than error or NOCLAR. True or False?
False
NOTE : All 3 should be investigated (no one above the other)
As an auditor, I must make sure that all error, fraud, and NOCLAR is detected. True or False?
False (primary focus is MATERIAL misstatements)
2 Types of Fraud
- Fraudulent Financial Reporting (Management Fraud)
Other term → misrepresentation - Misappropriation of Assets (Employee Fraud)
Embezzling, theft, lapping
Auditor is the one who is responsibile to prevent and detect fraud and error. True or False?
False
Management / TCWG → prevent and detect
Auditor → obtain SAAE to provide reasonable assurance that FS is free from material misstatements
The audit was done. However, a fraud/error was not detected by an auditor. This is an evidence that the auditor did not do his job. True or False?
False
- Auditor cannot be held responsible for non detection of fraud or error since responsibility nga yon ng management (XPN : auditor did not comply with PSA)
Fraud Triangle
- Opportunity
- Incentive or Pressure
- Rationalization
What are the uncontrollable factors?
Pressure and Rationalization → uncontrollable factors
These are red flags (seen in client who has fraud before). Examples are net loss, weak IC, emphasis on profit, etc.
Fraud Risk Factors
NOCLAR (regardless of amount)
- omission or commission
- Intentional or unintentional
Yes
An auditor is expected to detect all NOCLAR. True or False?
False
Management / TCWG → prevent, detect, comply
Auditor → cannot be expected to detect all NOCLAR
Material Error
- adjust?
- report to TCWG?
- adjust = ✔
- report = ✔
Immaterial Error
- adjust?
- report to TCWG?
- adjust = ✘
- report = ✘
Material Fraud
- adjust?
- report to TCWG?
- adjust = ✔
- report = ✔
Immaterial Fraud
- adjust?
- report to TCWG?
- adjust = ✘
- report = ✔
report → different to immaterial error (mas malala na yung fraud so need ireport)
Material NOCLAR
- adjust?
- report to TCWG?
adjust = depends
- with direct effect in GS = obtain SAAE
- without direct effect = ✘
report = ✔
Immaterial NOCLAR
- adjust?
- report to TCWG?
adjust = depends
- with direct effect in GS = obtain SAAE
- without direct effect = ✘
report = ✔
report → different to immaterial error (mas malala na yung NOCLAR so need ireport)
