Readings

Question 1

Rise of External fraud

Answer 1

External fraudsters such as hackers and org crime group, becoming a greater threats

70% orgs experiencing fraud reported most disruptive came from external source

Question 2

Prevelance and Impact of Fraud

Answer 2

46% of orgs experienced fraud in last 2 yrs

Larger companies(>10bn) reported higher fraud incidents 52% compared to smaller(<100m) 38%

Question 3

Top Frauds

Answer 3

Cybercrime, customer fraud, and asset misappropriation

Question 4

Industry specific trends

Answer 4

Cybercrime dominates across industries, except energy and utility resources where procurement is bigest threat
Technology reported highest fraud rates

Question 5

Covid Impact on Fraud

Answer 5

70% of orgs experienced new types of fraud due to the pandemic
- supply chain and misconduct risks increased

Question 6

New Fraud Risks

Answer 6

ESG Reporting Fraud and Supply Chain Fraud

Question 7

Stronger Fraud Prevention Efforts

Answer 7

Companies are improving technical capabillities and internal controls

2/3rds of orgs experiencing fraud discovered most dirup incident through controls

Question 8

Digital Platforms as a new Fraud Frontier

Answer 8

40% fraud incidents linked to digital platforms
- money laundering, disinformation, know your customer

Question 9

Section 10A Auditor Responsibilities

Answer 9

• investigate and report illegal acts discovered during audit
• If illegal act is suspected, auditor must determine likelihood, assess financial impact, and notify mngm and audit committee

Question 10

Threshhold for Investigation

Answer 10

Low - Sec 10A applies broadly to any illegal act
Even non material illegal acts reported, unless clearly inconsequention

Question 11

Reporting and Disclosure Obligs

Answer 11

• If management fails to take approp remedial action, report to BoD
• The BOD must notify the SEC within 1 business day, or otherwise auditor resigns or informs the SEC directly

Question 12

Investigation impact on Audits

Answer 12

1. Auditors may suspend work until investigation is complete, delaying fin filings (pencils down)
2. Companys must take timely and approp remedial action to avoid auditor resignations and SEC reporting

Question 13

How to maintain confidentiality and independence for invetigations

Answer 13

Engage independent counsel for investigations