Lec 13 Flashcards
what degree of complicance is normally required
around 90 percent
what is teh exception to the degree of complainace percentage
it controls, since they are not human ran, 100% is required
what is the enforced vacation control and how is it preventative and detective
the company forces the manager to take vacation days and does not let them compound to next year
detective - it allows the person temprorily filling in to detect fraud
preventative - manager knows a person is filling in thus is deterred from fraud
how do the stock exchanges effect board of directors
they force company to have better ic through having a board AND more importantly an udit commitee
excahnge requires committee to be fully independent and composed of financial experts
what are the two causes of mistttemtns
fraud and error
what are the two types of fraud
missapropriation of assets and financial reporting fraud
what is the CAS 240 requirement hen it comes to auditors and misstattmens
auditors are required to discover misstatments and provide reasonable assurancec taht statments are free from misstatments whether due to fraud or error. this is done through obtaining sufficeint evidence
who is the injured part in misappropriation of assets
injured party is the company itself
what are some examples of asset missapropriation
- stealing cash, inv, a/r
- kickback (officer pick worse supplier because they give some sort of monetary compensation
- padding of expense account - uses expense account for innapropraite purposes
who is the injured part is fianncial reporting fraud
the final users; investors creditors etc
what is another name for asset missapororaition and f/r fraud
employee fraud and management fraud
what are some ways that fraud is commmited
- deception (manipulation, falsifiation)
- misrepresentation of events/transactions
- intnetional missaplication of accoutning standards
what is missaplication of accounting principles and is it a red flag
companies are expected to use most apprpriate form of IFRS, which is what the rest of the specifc industry is using. if not being used must give reason as to why, otherwise it is red flag
as per cas 240, should previous experineces with managemetn integrity be taken into consideration in the current year audit?
no, cas 240 states that notwithstanding past experinces with management, and they must be reassessed every year. this is part of professional scepticism
what is primary reposnsibility of audit commitee
oversee financial reporting and i/c, and somtimes investigate f/r issues
what is the issue of managemetn creating the internal controls
since they created, they are capable of overriding them
is overrding i/c an issue, and what is a sign that it is
not neccessarily, but you should look out for big dollar amount entries AT year end of right after year end
what is coso and its bitch ass study
coso helps companies implement better internal controls. the study is done based on this
what did aol do
send packages to customers without them asking and recorded revenue. issue in existence
what did enron do
set up SPE that in which it put all it liabilities. they were set up in a way where they did not have to consolidate. issue in completeness
three reasons fraud is difficult to detect for auditor
- knowledge of i/c is inferior to that of client employees
- fraud is intentiaonally conscealed
- management have ability to override i/c
what should the auditor be loking for as risky areas
- dicreptencies in accoutnign records
- confilcting or missing evidence
- problematic or unusual relationship between auditor and managemtn
- policies adheereing to industry norms
what is the audtors job in regards to management made estimates and give a real world example
auditors are responsible for evaluatiing the reasonbaleness of the estimates.
examples is nortel and their dit assets which they did not expect to get back
fraud risk factors should be documented. where should these risk facors be generated and what is this process contaon
made in fraud brainstorming sessions. fraud risks of client are disscussed by the entire team from partner to intern
