Week 1-3

Question 1

Fraud triangle

Answer 1

1. Opportunity
2. Rationalization
3. Incentive

Question 2

Auditor responsibility; passive philosophy

Answer 2

An auditor is not bound to be a detective, or as was said, to approach his work with suspicion or
with a foregone conclusion that there is something wrong. He is a watchdog but not a bloodhound

Question 3

Auditor responsibility; primary responsibility

Answer 3

the prevention and detection of fraud rests with both those charged with governance (non-executive board members) of the entity and management.

Question 4

Auditor responsibility; secondary responsibility

Answer 4

the auditor should obtain an understanding of the entity and its environment, including its internal control, sufficient to identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and sufficient to design and perform further audit procedures

Question 5

Auditor respones to fraud

Answer 5

Further investigation
Overall response –> for example: more experienced personnel to be engaged with the client
Assertion level response –> change nature, timing and extend of audit work
Update RMM

Question 6

Crime and punishment: an economic approach – G. Becker (1968)

Answer 6

Conclusion
- Entry into illegal activities by the same model of choice to explain entry into legal activities
- Offenders are risk takers
- Optimal policies to combat illegal behavior are part of an optimal allocation of resources
- Auditors will always be under pressure