rr chapter 11

8/18/2019 Rr Chapter 11

1/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 - 1

Fraud Auditing

Chater 11

8/18/2019 Rr Chapter 11

2/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 22

!earning "b#ecti$e 1

%e&ine &raud and distinguish

bet'een &raudulent &inancial

re(rting and )isar(riati(n

(& assets*

8/18/2019 Rr Chapter 11

3/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - ++

yes (& Fraud

Fraudulent &inancial re(rting

isar(riati(n (& assets

8/18/2019 Rr Chapter 11

4/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - ..


%escribe the &raud triangle and

identi&y c(nditi(ns &(r &raud*

8/18/2019 Rr Chapter 11

5/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 -

he Fraud riangle

ncenti$es/Pressures

"(rtunities Attitudes/ati(naliati(n

8/18/2019 Rr Chapter 11

6/33


E4a)les (& is5 Fact(rs

&(r Fraudulent e(rting

Financial stability (r r(&itability is threatened by

ec(n()ic, industry, (r entity (erating c(nditi(ns

E4cessi$e ressure e4ists &(r )anage)ent t(

)eet debt re6uire)ents

Pers(nal net '(rth is )aterially threatened

ncenti$es/Pressures7

8/18/2019 Rr Chapter 11

7/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 -



here are signi&icant acc(unting esti)ates that

are di&&icult t( $eri&y

here is ine&&ecti$e ($ersight ($er &inancial

re(rting

High turn($er (r ine&&ecti$e acc(unting internal

audit, (r in&(r)ati(n techn(l(gy sta&& e4ists

"(rtunities7

8/18/2019 Rr Chapter 11

8/33




nar(riate (r ine&&icient c())unicati(n

and su(rt (& the entity9s $alues is e$ident

A hist(ry (& $i(lati(ns (& la's is 5n('n

anage)ent has a ractice (& )a5ing

($erly aggressi$e (r unrealistic &(recasts

Attitudes/ati(naliati(n7

8/18/2019 Rr Chapter 11

9/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - ::


&(r isar(riati(n (& Assets

Pers(nal &inancial (bligati(ns create ressure

t( )isar(riate assets

Ad$erse relati(nshis bet'een )anage)ent

and e)l(yees )(ti$ate e)l(yees t(

)isar(riate assets

ncenti$es/Pressures7

8/18/2019 Rr Chapter 11

10/33




here is a resence (& large a)(unts (& cash

(n hand (r in$ent(ry ite)s

here is an inade6uate internal c(ntr(l ($er

assets

"(rtunities7

8/18/2019 Rr Chapter 11

11/33




%isregard &(r the need t( )(nit(r (r reduce

ris5 (& )isar(riating assets e4ists

here is a disregard &(r internal c(ntr(ls

Attitudes/ati(naliati(n7

8/18/2019 Rr Chapter 11

12/33

8/18/2019 Rr Chapter 11

13/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 1+1+

Assessing the is5 (& Fraud

8/18/2019 Rr Chapter 11

14/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 1.1.

8/18/2019 Rr Chapter 11

15/33


%(cu)enting Fraud

Assess)ent

%iscussi(n

8/18/2019 Rr Chapter 11

16/33


!earning "b#ecti$e .

denti&y c(r(rate g($ernance

and (ther c(ntr(l en$ir(n)ent

&act(rs that reduce &raud ris5s*

8/18/2019 Rr Chapter 11

17/33


C(r(rate ?($ernance "$ersight

t( educe Fraud is5s

1* Culture (& h(nesty and high ethics

2* anage)ents res(nsibilityt( e$aluate ris5s (& &raud

+* Audit c())ittee ($ersight

8/18/2019 Rr Chapter 11

18/33


E4a)le Ele)ents &(r a C(de

(& C(nduct

"rganiati(nal c(de (& c(nduct

?eneral e)l(yee c(nduct

C(n&licts (& interest

"utside acti$ities, e)l(y)ent, and direct(rshis

8/18/2019 Rr Chapter 11

19/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 1:1:


(& C(nduct

elati(nshis 'ith clients and suliers

?i&ts, entertain)ent, and &a$(rs

ic5bac5s and secret c())issi(ns

"rganiati(n &unds and (ther assets

8/18/2019 Rr Chapter 11

20/33



(& C(nduct

"rganiati(n rec(rds and c())unicati(ns

%ealing 'ith (utside e(le and (rganiati(ns

Pr()t c())unicati(ns

Pri$acy and c(n&identiality

8/18/2019 Rr Chapter 11

21/33


"rganiati(nal Fact(rs

C(ntributing t( is5 (& Fraud

200+ 1::8 1::.

C(llusi(n bet'eene)l(yees and

third arties

nade6uateinternalc(ntr(ls

anage)ent

($erride (& internal c(ntr(ls

.8+1++

+:8:

+1+3+3

8/18/2019 Rr Chapter 11

22/33


"rganiati(nal Fact(rs

C(ntributing t( is5 (& Fraud

C(llusi(n bet'eene)l(yees and

)anage)ent

!ac5 (& c(ntr(l($er )anage)ent

by direct(rs

ne&&ecti$e (r

n(ne4istent ethics (r c()liance r(gra)

11:2+

1211 3

10 8

200+ 1::8 1::.

8/18/2019 Rr Chapter 11

23/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 2+2+

!earning "b#ecti$e

%e$el( res(nses t( identi&ied

&raud ris5s*

8/18/2019 Rr Chapter 11

24/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 2.2.

es(nding t( the is5 (&

Fraud

Change the ($erall c(nduct (& the audit

t( res(nd t( identi&ied &raud ris5s*

%esign and er&(r) audit r(cedures

t( address identi&ied ris5s*

%esign and er&(r) r(cedures t(address the ris5 (& )anage)ent

($erride (& c(ntr(ls*

8/18/2019 Rr Chapter 11

25/33



ec(gnie seci&ic &raud ris5

areas and de$el( r(cedures

t( detect &raud*

8/18/2019 Rr Chapter 11

26/33


ates (& Fraud "ccurrence

200+ 1::8

he&t (& assets .:22

Chec5 &raud.023

E4ense acc(untabuse

+31+

Credit card &raud201+

Payr(ll &raud12 +

8/18/2019 Rr Chapter 11

27/33


ates (& Fraud "ccurrence

200+ 1::8

C(n&lict (& interest 12 :

n$ent(ry the&t1111

ic5bac5s : 3

Financial re(rting&raud

+

8/18/2019 Rr Chapter 11

28/33


8/18/2019 Rr Chapter 11

29/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - 2:2:

!earning "b#ecti$e

;nderstand inter$ie' techni6ues

and (ther acti$ities a&ter &raud

is susected*

8/18/2019 Rr Chapter 11

30/33

©2008 Prentice Hall Business Publishing,©2008 Prentice Hall Business Publishing, Auditing 12/e, Auditing 12/e, Arens/Beasley/Elder Arens/Beasley/Elder 11 -11 - +0+0

eth(ds (& ;nc($ering Fraud

nternal c(ntr(ls

nternal audit

@(ti&icati(n by e)l(yee Accident

An(ny)(us ti

@(ti&icati(n by cust()er

@(ti&icati(n by regulat(ry (r la' en&(rce)ent agency

@(ti&icati(n by $end(r

E4ternal audit

3

3+.

.1

+.

1:

13

12

1

.+

8+

+

.1

13

11

.

2

.

128

23

+.

8

1

(Percentages) 200 !""# !""$

8/18/2019 Rr Chapter 11

31/33


es(nding t( isstate)ents hat

ay Be the esult (& Fraud

hen &raud is susected, the audit(r gathers

additi(nal in&(r)ati(n t( deter)ine 'hether

&raud actually e4ists*

8/18/2019 Rr Chapter 11

32/33


yes (& n6uiry echni6ues

n&(r)ati(nal in6uiry

Assess)ent in6uiry

nterr(gati$e in6uiry

E$aluating res(nses

!istening techni6ues

"bser$ing beha$i(ral cues

8/18/2019 Rr Chapter 11

33/33

©2008 Prentice Hall Business Publishing©2008 Prentice Hall Business Publishing Auditing 12/eAuditing 12/e Arens/Beasley/ElderArens/Beasley/Elder 11 - ++

End (& Chater 11

rr chapter 11

Documents