Detecting Fraud Within Organization-Free-Samples-Myassignmenthelp

Questions: 1.Explain how your results Influence your planning decisions for the audit for the year ending 30 June 2015. 2.Explain why it is a risk and how it may affect the risk of Material Misstatement in the Financial Report. 3.Identify and Explain two key Fraud Risk Factors relating to Misstatements arising from Fraudulent Financial Reporting to which DIPL may be susceptible. Answers: 1.Substantive analytical procedures are very helpful in assertion of the transparency of the accounts and the other audit procedures that may have been applied in maintaining the books of account, and preparation of the financial statements. In case of DIPL, the company has been engaged in the business of printing from a long time, and we have been provided with last three years books of account to make our assertion on the transparency of the system of the company. Analytical procedures will include comparison of the financial data with previous year data, the budget prepared by the company, and other industry forecasts and scenarios. We can do the same by conducting ratio analysis, trend analysis, studying of the financial data from the companys previous account. In the information provided by the DIPL financial statements, we will conduct our analysis and comparison, and then decide whether the present situation of the company is better in financial terms than previous years. If g oing by the industry trends we see that the company is not in a better position in comparison to the industry standards, we will then apply possible substantive methods to find the reason of the same. We will check whether effective internal control is maintained by the company. If the actual results and the standard results vary a lot, then further procedures needs to be adopted. As an auditor, inform the management about the same, and try to obtain further more information from the management that may help in further analysis.(Grenier 2017) There can be various reasons behind such deviations and the main work of the audit team is to ascertain the main reason why the company is deviating from the set standards. In the given statements we see that the company is doing better than each previous year, the profit has increased and also there is a steady growth in the financial of the company. This means that the companys internal control is strong, the management has applied diligence in conducting their work and thus the auditor does not need to apply further procedures. The industry data are not available; hence the trend analysis cannot be done. If there is a deviation with the industrial standards then further analytical and substantive methods needs to be applied. But as stated in the document that in the current year, the company has taken a loan of 7.5 million, which requires the company to maintain certain ratios, failure to do so would lead to recall of the loan. So as an auditor, that must be checked and verified w hether the loans are taken on proper terms and how is it affecting the financial of the company(Knechel Salterio 2016). 2.The two types of risk factors that are present in the management of the company and that may lead to material misstatement are that, a single person is authorised to download the receipts, verify the payments and authorise the transfer. This causes a risk of material misstatement, because in terms of important procedures, segregation of duties is very important. Moreover the accounts receivable are received by cheque via mail and that is also a very risk situation as there are chances of information being leaked and hacked. And as stated in the company statements, Judy Bones is given all the responsibility of downloading the receipts from the mail, forwarding the amount, and also reconciling the total batch payments and the account receivables. Thus there is no segregation of duty. The other kind of risk is the one associated with the new IT system, in which installation occurred under extreme pressure without any proper checks and also we see that there are no staffs to do proper reconciliation, before the new IT system was live. Thus the new system was installed without proper verification and that may lead to material misstatement and other inherent risks are associated with the same, as the management has failed to ascertain proper internal control. The other risks are involved, in changing of the method of accounting and accounting policies year after year and that may often impose limitations on the auditor to conduct proper audit(DeZoort Harrison 2016). 3.The two points in the statements that shows that fraud might have occurred is that one there is no segregation of major duties in the company. The clerk is given important duties of preparation of the invoice and recording of the same, then Gay the accounts receivable clerk does all the major work of checking the accuracy, verifying the payment , reconciliation of the books of account and also entering the same into his account statements. The same is in case of e receipts of account receivable, where the payment is collected by a single cashier, who downloads the receipts, verifies the payments and transfers it. And also does the necessary reconciliation on her part. Thus we see that there is no segregation of duty and that may often lead to fraud. The other point is the main associated with the new IT system, where unnecessary pressure was exerted by the managers to install the same without proper reconciliation and checking, thus there might be chances of fraud on part of the ma nagement(Fay Negangard 2017). The risk factors that are identified above, may affect the audit in many ways, because if there is no internal control, the auditor has to perform several other methods and that may increase the complexities. Moreover if there is no proper information provided it may lead to adverse opinions in the audit report. The risks might be such that they are not easily identifiable in the process of audit because many a time, only one person is performing major duties. So there may be problems in cross checking and obtaining hidden information. In all these ways the auditor will face difficulty if the risks are involved(Raiborn, Butler Martin 2016). References DeZoort, FT Harrison, PD 2016, 'Understanding Auditors sense of Responsibility for detecting fraud within organization', Journal of Business Ethics, pp. 1-18. Fay, R Negangard, EM 2017, 'Manual journal entry testing : Data analytics and the risk of fraud', Journal of Accounting Education, vol 38, pp. 37-49. Grenier, J 2017, 'Encouraging Professional Skepticism in the Industry Specialization Era', Journal of Business Ethics, vol 142, no. 2, pp. 241-256. Knechel, WB Salterio, SE 2016, Auditing:Assurance and Risk, 4th edn, Routledge, New York. Raiborn, C, Butler, JB Martin, K 2016, 'The internal audit function: A prerequisite for Good Governance', Journal of Corporate Accounting and Finance, vol 28, no. 2, pp. 10-21