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Fraud Risk Factors (Continued) : Engagement Planning - Module 1

The document discusses several fraud risk factors that could lead an auditor to conclude there is a high risk of misappropriation of assets. These include a lack of proper oversight of operations, inadequate screening of employees with access to assets, and insufficient segregation of financial duties. Other general fraud risk factors mentioned are low employee morale, financially stressed employees, and adverse relationships between employees and management. The document also notes that the auditor must consider fraud risk factors when designing audit procedures, but the presence of factors does not necessarily indicate the existence of fraud. The auditor should inquire with management about their understanding and knowledge of fraud risks.

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Hazem El Sayed
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44 views2 pages

Fraud Risk Factors (Continued) : Engagement Planning - Module 1

The document discusses several fraud risk factors that could lead an auditor to conclude there is a high risk of misappropriation of assets. These include a lack of proper oversight of operations, inadequate screening of employees with access to assets, and insufficient segregation of financial duties. Other general fraud risk factors mentioned are low employee morale, financially stressed employees, and adverse relationships between employees and management. The document also notes that the auditor must consider fraud risk factors when designing audit procedures, but the presence of factors does not necessarily indicate the existence of fraud. The auditor should inquire with management about their understanding and knowledge of fraud risks.

Uploaded by

Hazem El Sayed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as RTF, PDF, TXT or read online on Scribd
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Fraud Risk Factors (continued)

Existence of other factors lead auditor to conclude high risk of misappropriation of assets
Characteristics indicating lack of adequate control over susceptible assets
Operations not subject to proper oversight
Inadequate screening of applicants for positions with access to assets
I nadeq uate record keepi ng
Insufficient segregation of duties with lack of independent checks
Inappropriate system for authorizing & approving transactions
Inadequate physical safeguards over assets
Untimely or inappropriate documentation of transactions
·1 No requirement for vacations among employees performing key functions

Other factors increase general risk of material misstatement of financial statements due to fraud
Low employee morale
·2 Employees financially stressed
Adverse relationship between employees & management or entity

Focus on
Engagement Planning - Module 1 28

Assessing Risk of Fraud


Risk of material misstatement due to fraud part of audit risk
Auditor must consider existence of risk factors when designing audit procedures
·3 Risk factors not necessarily indicative of existence of
fraud
Factors are considered individually & collectively

Auditor should make inquiries of management regarding


·4 Management's understanding of risk of fraud in entity
·5 Management's knowledge of fraud

Auditor may become aware of risk factors when


Deciding on acceptance of the engagement
·6 Planning the engagement
Obtaining an understanding of internal control
·7 Performing fieldwork

Focus on
2
Engagement Planning - Module 1

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