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Question

u-x,x' a-y.A- 5- 2:· 1Nor nal 1NoSpac. Heading 1 Heading 2 Subtitle Subtle Em Title Font Paragraph o Cash shortages and overages. What type of questions should an auditor ask when determining a company's vulnerability to fraud? What is the risk for every of these questions? What test of control must be implemented? What substantive procedure must be implemented? Is the company dominated by one or two key employees? Do any key employees appear to have a close association with vendors? Do any key employees have outside business interests that might conflict with their job duties? Does the organization conduct pre-employment background checks to identify previous dishonest or unethical behavior? . . Does the organization educate employees about the importance of ethics and antifraud programs? Does the organization have antifraud policies and provide an anonymous way to report suspected violations of ethics? . .

Explanation / Answer

1) Risk that company internal control may be override

2) Risk of possible fraud which involves the collusion between such employees

1) Determine that employer control the method in which job is carried out.

2) Employer should have opinion on selection of any employee.

3) Maker checker concept can be applied

1) Risk of vendor's related fraud like overbilling

2) fraud which involves collusion between employee and vendors

1) use of data mininh techniques

2) Review of pattern of payment to vendors

3) Investigate cases where there is unexplained change in those vendor profile

1) Audit risk in Accounts payable and purchases is very high. Auditor should have professional skepticism and give the reasonable assurance at assertion level about existence and occurrence.

1) Effecting the decision making of employee at work

2) providing consultancy service on side to client of employer

1) Emplyer set when work must be performed

2) Employer should regularly review the check in and check out of employees

3) Regularly review the performance of employees.

4) Putting the clause in employement contract about conflict of interest

1) Risk of hiring someone who is not qualifies

2) Risk of data leakage and data sabotage

Test of details ( part of substantive procedure) needs to be done for - salary expenses,sick leave, stock options, leave encashment, bonuses, withheld from company's pay

auditor question for Determing company vulnerabilty to fraud

1) Very high variation in ration analysis

2) Material misstatemenr excess the materiality level.

3) Hugh volume of journal entries at year end

4) revenue loss to firm

5) weaknesses in Internal control system of company

Situation risk test of control substantive procedure Company dominated by one or two key employee

1) Risk that company internal control may be override

2) Risk of possible fraud which involves the collusion between such employees

1) Determine that employer control the method in which job is carried out.

2) Employer should have opinion on selection of any employee.

3) Maker checker concept can be applied

Substantive procedure for work done by such employees have reasonable and adequate supporting documentation. Employees have close association with vendors

1) Risk of vendor's related fraud like overbilling

2) fraud which involves collusion between employee and vendors

1) use of data mininh techniques

2) Review of pattern of payment to vendors

3) Investigate cases where there is unexplained change in those vendor profile

1) Audit risk in Accounts payable and purchases is very high. Auditor should have professional skepticism and give the reasonable assurance at assertion level about existence and occurrence.

Conflit of Interest if employee has outside business

1) Effecting the decision making of employee at work

2) providing consultancy service on side to client of employer

1) Emplyer set when work must be performed

2) Employer should regularly review the check in and check out of employees

3) Regularly review the performance of employees.

4) Putting the clause in employement contract about conflict of interest

1) If therevis any conflict of interest which need to be reported in financial reporting then obtain sufficient and apporpriate audit evidence for disclosure requirements Whether company check pre-employment background checks

1) Risk of hiring someone who is not qualifies

2) Risk of data leakage and data sabotage

1) Specific protocol must be folllwed for pre-employent check through payrol department

Test of details ( part of substantive procedure) needs to be done for - salary expenses,sick leave, stock options, leave encashment, bonuses, withheld from company's pay

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