Flashcards in Fraud Risk Deck (22):
What are unintentional misstatements or omissions?
What is an intentional act by one or more individuals?
What are the 3 types of fraud?
Fraudulent financial reporting, misappropriation of assets, and corruption
What involves intentional misstatements or omissions of amounts or disclosures in the financial statements that are designed to deceive financial statement users?
Fraudulent financial reporting
What involves theft of an entity's assets?
Misappropriation of assets
What are the 3 fraud risk factors?
Incentives/Pressures, opportunity, and rationalization
What is a discussion topic among Engagement Personnel?
Consideration of the risk of management override of controls
What are the procedures used to obtain information useful in identifyying potential fraud risks?
Inquire of entity personnel regarding their views of fraud risk, consider the results of analytical procedures, and evaluate fraud risk factors
When is analytical procedures required during?
Planning and final review stage
Does lack of observation of any or all of the three fraud risk factors imply that there is no fraud risk?
What are the 4 attributes of risk?
Type, significance, likelihood, and pervasiveness
There is a presumption in every audit that what two risks exist?
Improper revenue recognition and management override of controls
What are the other 2 considerations for identifying risks?
Size, complexity, and ownership characteristics of the entity and susceptibillity of items to manipulation
The auditor is required to respons to the results of the fraud risk assessment on what 3 levels?
Overall General response, response encompassing specific audit procedures, and response addressing risks related to management override
The auditor should consider the overall fraud risk when?
Assigning personnel to the engagement, supervision, management's selection and application of accounting principles, and unpredictability in the selection of auditing procedures
The following procedures should be performed to address the risk of management override of controls?
Examine journal entries and other adjustments, review accounting estimates for biases, and evaluate the business purpose for significant unusual transactions
What are conditions identified during fieldwork that may affect the assessment of fraud risk?
Discrepancies in the accounting records, conflicting or missing evidential matter, problematic relationships between the auditor and management, objections by management to the auditor meeting privately with the audit committee, accounting policies that appear inconsistent with industry practices, frequent changes in accounting estimates, and tolerance of violations of the company's code of conduct
Who should the auditor discuss fraud that causes a material misstatement of the financial statements with?
Senior management and reported directly to those charged with governance
Who should the auditor discuss fraud involving senior management with?
Those charged with governance
A duty disclose fraud outside the entity exist?
To comply with certain legal and regulatory requirements, to a successor auditor, response to a subpoena, a funding agency or other specified agency in accordance with requirements for receiving governmental financial assistance, and to authorities
Is complete documentation of the auditor's risk assessment and response required?