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    At (3) - Auditor'S Responsibility: Employee Fraud. It Involves The Theft of An

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    Pau Santos
    The auditor is responsible for designing an audit to reasonably detect material misstatements in financial statements that may arise from errors, fraud, or non-compliance. Errors refer to unintentional misstatements, while fraud involves intentional deception for unjust advantage. There are two types of fraud - fraudulent financial reporting and misappropriation of assets. Management is responsible for internal controls to prevent and detect fraud and errors, while those charged with governance ensure integrity of financial reporting. As part of audit planning, the auditor inquires about fraud risks and considers these risks in designing audit procedures.

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    At (3) - Auditor'S Responsibility: Employee Fraud. It Involves The Theft of An

    Uploaded by

    Pau Santos
    49 views1 page
    The auditor is responsible for designing an audit to reasonably detect material misstatements in financial statements that may arise from errors, fraud, or non-compliance. Errors refer to unintentional misstatements, while fraud involves intentional deception for unjust advantage. There are two types of fraud - fraudulent financial reporting and misappropriation of assets. Management is responsible for internal controls to prevent and detect fraud and errors, while those charged with governance ensure integrity of financial reporting. As part of audit planning, the auditor inquires about fraud risks and considers these risks in designing audit procedures.

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    Original Title

    Chapter 3

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    The auditor is responsible for designing an audit to reasonably detect material misstatements in financial statements that may arise from errors, fraud, or non-compliance. Errors refer to unintentional misstatements, while fraud involves intentional deception for unjust advantage. There are two types of fraud - fraudulent financial reporting and misappropriation of assets. Management is responsible for internal controls to prevent and detect fraud and errors, while those charged with governance ensure integrity of financial reporting. As part of audit planning, the auditor inquires about fraud risks and considers these risks in designing audit procedures.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    49 views1 page

    At (3) - Auditor'S Responsibility: Employee Fraud. It Involves The Theft of An

    Uploaded by

    Pau Santos
    The auditor is responsible for designing an audit to reasonably detect material misstatements in financial statements that may arise from errors, fraud, or non-compliance. Errors refer to unintentional misstatements, while fraud involves intentional deception for unjust advantage. There are two types of fraud - fraudulent financial reporting and misappropriation of assets. Management is responsible for internal controls to prevent and detect fraud and errors, while those charged with governance ensure integrity of financial reporting. As part of audit planning, the auditor inquires about fraud risks and considers these risks in designing audit procedures.

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    AT (3) AUDITORS RESPONSIBILITY

    The auditors responsibility is to design the audit to provide


    reasonable
    assurance
    of
    detecting
    material
    misstatements in the financial statements. These
    misstatements may emanate from:
    1.
    2.
    3.

    Errors;
    Fraud; or
    Non-compliance with Laws & Regulations

    ERROR
    The term error refers to unintentional misstatements in
    the financial statements, including the omission of an
    amount or a disclosure, such as:

    Mathematical or clerical mistakes in the


    underlying records and accounting data;
    An incorrect accounting estimate arising from
    oversight or misinterpretation of facts;
    Mistake in the application of accounting
    policies

    entitys assets committed by the entitys


    employee. This may include the ff.:
    a. Embezzling receipts;
    b. Stealing entitys assets;
    c. Lapping of accounts receivables.
    Elements of Fraud
    Fraud involves:
    1.
    2.
    3.

    Responsibility of Management and Those Charged with


    Governance
    PSA 240 requires the following in order to prevent and
    detect fraud and errors:
    1.

    FRAUD
    Fraud refers to intentional act by one or more individuals
    among management, employees, third party or those
    charged with governance, involving the use of deception to
    obtain unjust or illegal advantage.
    Auditor is primarily concerned with fraudulent acts that
    cause a material misstatement in the financial
    statements.

    2.

    2.

    Fraudulent Financial Reporting involves the


    intentional misstatement or omission of amounts
    or disclosures in the financial statements. It is
    also known as management fraud. This may
    include the ff.:
    a. Manipulation, falsification or alteration
    of records or documents;
    b. Misrepresentation in or intentional
    omission of the effects of transactions
    from records or documents;
    c. Recording of transactions without
    substance; or
    d. Intentional misapplication of policies.
    Misappropriation of Assets also known as
    employee fraud. It involves the theft of an

    Management
    a. Establish a control environment; and
    b. Implement internal control policies
    and procedures.
    Individuals charged with Governance to ensure
    the integrity of an entitys accounting and
    financial reporting systems.

    AUDITORS RESPONSIBILITY
    Planning Phase
    1.

    Types of Fraud
    1.

    Motivation;
    Perceived Opportunity
    Rationalization of the Act

    2.

    when planning, an auditor should make inquiries


    about the possibility of misstatements due to
    fraud or errors. Such inquiries may include:
    a. Management risk assessment due to
    fraud
    b. Controls established to address the
    risk
    c. Any material error or fraud that has
    affected the entity or currently being
    investigated.
    The auditor should assess the risk of material
    misstatements due to fraud and consider this
    assessment in designing audit procedures to be
    performed.

    Fraud Risk Factor events or conditions that provide an


    opportunity, a motive or a means to commit fraud, or
    indicate that fraud may have already occurred.

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