Fraud (1)

Question 1

What is fraud?

Answer 1

Intentional act by one or more individuals among management which involves use of deception to obtain an unjust or illegal advantage

Question 2

How may fraud be perpetrated?

Answer 2

By an individual, or colluded in, with people internal or external to business

Question 3

What are fraud risk factors/

Answer 3

Events or conditions that indicate on incentive or pressure to commit fraud or provide an opportunity to commit fraud

Question 4

Fraud which may cause material misstatement in FS (financial)

Answer 4

Fraudulent financial reporting (intentional misstatements, including omissions of amounts or disclosures in FS, to deceive FS users)

Question 5

Fraud which may cause material misstatement in FS (asset)

Answer 5

Misappropriation of assets (theft of an entity’s assets)

Question 6

Who is repsonsible for preventing and detecting fraud?

Answer 6

An entity’s management and those charged with governance

Question 7

What is management’s responsibility (behaviour)?

Answer 7

To establish a culture of honesty and ethical behaviour

Question 8

What is management’s responsibility (system)?

Answer 8

To implement a system of internal control to mitigate the risk of fraud

Question 9

What does ISA 240 state?

Answer 9

The auditor is responsible for obtaining reasonable assurance that FS are free from material misstatement, whether caused by fraud or error