Audit Planning, Fraud, and Risk

Flashcards on Audit Planning, Fraud, and Risk Assessment

Errors

Unintentional mistakes in accounting data, underlying records, or misinterpretation of facts and events.

Fraud

An intentional act involving deception to obtain an unjust or illegal advantage.

Fraudulent financial reporting

Manipulation of records, omission of transactions, or intentional misapplication of accounting policies.

Misappropriation of assets

Stealing assets or using business assets for personal benefit.

Fraud Triangle Factors

Perceived pressure, perceived opportunity, rationalization.

Fraudulent Financial Reporting Examples

Manipulation, falsification, or alteration of records; suppression or omission of transactions; recording transactions without substance; intentional misapplication of accounting policies.

Misappropriation of Assets Examples

Embezzling receipts, stealing assets, causing an entity to pay for goods not received, using an entity's assets for personal use.

Errors Examples

Mathematical or clerical mistakes, oversight or misinterpretation of facts, misapplication of accounting policies.

Audit Planning (ISA (NZ) 315)

Gaining an understanding of the entity, its internal control practices, and events/transactions that may have a material impact on the financial report.

How knowledge of the entity and its environment helps the auditor

Assess risks and identify problems, determine materiality, consider accounting policies and disclosures, identify areas needing special attention, develop expectations for analytical procedures, design audit procedures,evaluate audit evidence.

Key areas for auditor knowledge of an entity

Industry, regulatory, and other external factors; nature of the entity; accounting policies; objectives and strategies and business risks; measurement and review of financial performance.

Operational Structure

Types of products and services, locations, and methods of production, distribution, and compensation.