M3 Fraud, laws and regulations

Question 1

Which legislation is relevant to fraud, laws and regualtions in auditing?

Answer 1

• ISA 240
• ISA 250R

Question 2

What is fraud, in comparison to an error?

Answer 2

According to ISA 240
- Fraud is an intentional act perpetrated by management or those charged with governance, employees or third parties, involving the use of deception to obtain unjust or illegal advantage through either
* the misappropriation of assets
* fraudulent financial reporting
* incentizing/pressuring others to do it

• An error is an unintentional misstatement

Question 3

What is the Auditor’s responsibility to fraud within the financial statements?

Answer 3

According to ISA 240,
- the auditor has no duty to prevent fraud
- However there is some responsibility to detect fraud
* if we don’t detect it because of negilance, then we are going to be in trouble

Question 4

What risk assessment procedures can you perform in order to detect fraud?

Question 5

What responses can you have to fraud at a financial statement level?

Question 6

What responses can you have to fraud at an assertion level?

Question 7

Who should we report fraud to, if detected?

Answer 7

according to ISA 240 para 41-44.
- Management of the company
- Those charged with governance of the company
- regulatory and enforceable authorities

Question 8

How should an Auditor respond to non-compliance with laws and regulations?

Answer 8

According to ISA 250 para 19-29
- In the same way they do in the SAICA COPC