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FRAUDULENT FINANCIAL REPORTING - Coggle Diagram
FRAUDULENT FINANCIAL REPORTING
How something is obtain illegally
Physically force someone by robbery
Trick
fraud
deception, confidence, trickery
Difference between fraud and error
Errors
mistake in gathering or processing data
unreasonable acc estimate arising from oversights of facts or misinterpretation of facts
unintentional misstatement
differences in application of accounting standard
Fraud
fraudulent financial reporting
manipulation, falsification or alteration of accounting records
misrepresentation or intentional omission of transactions
misapplication of accounting records
misappropriation of assets
stealing of assets
payment for goods or services not received
embezzling of cash receipts
intentional misstatement
Responsibilities towards fraud and error
Management
install effective accounting system
establish effective ICS
appointing audit committee
better internal control
Auditor
assess risk, design audit procedures, maintain professional skepticism
better internal control
Example high risk areas
management ignores any suggestion by internal and external auditors
internal controls are either poor or ignored by management
losses in inventory
unexceptionally large amount of expenses/purchases
Matters that auditor need to consider
Operating and industry characteristics
decline industry pattern
fluctuations in operating result as compared to general economic conditions
client is less profitable that company in same industry
Management characteristics
pressure to meet certain company's target
high management
dominated by one person
business poor reputation in business community
Characteristics of audit engagement
client transactions and balances are difficult to audit
issue raised in previous audit engagement