AUD Mini SIMs

PRS Company had recent changes in its management and the new management is not happy with the setup and functioning of its existing internal controls. The management has requested its Internal auditors to review and supervise the implementation of its new internal control system that achieves its objectives of:

• Authorization
• Validity
• Proper recording
• Accountability and comparison
• Protection and limited access. 

The new management along with its auditors decide that the audit shall be done in a cycle approach and has identified 5 transaction cycles based on its business activities.

• Sales, receivables and cash receipts cycle
• Purchases, payables and cash disbursement cycle
• Inventory and production cycle
• Personnel and payroll cycle
• Property, plant and equipment cycle. 

Advice the Sales Manager which of the following control does not achieve the objective of proper recording of transactions. 

PRS Company had recent changes in its management and the new management is not happy with the setup and functioning of its existing internal controls. The management has requested its Internal auditors to review and supervise the implementation of its new internal control system that achieves its objectives of:

• Authorization
• Validity
• Proper recording
• Accountability and comparison
• Protection and limited access. 

The new management along with its auditors decide that the audit shall be done in a cycle approach and has identified 5 transaction cycles based on its business activities.

• Sales, receivables and cash receipts cycle
• Purchases, payables and cash disbursement cycle
• Inventory and production cycle
• Personnel and payroll cycle
• Property, plant and equipment cycle. 

Advice the Purchase Manager which of the following control does not achieve the objective of Validity of transactions. 

PRS Company had recent changes in its management and the new management is not happy with the setup and functioning of its existing internal controls. The management has requested its Internal auditors to review and supervise the implementation of its new internal control system that achieves its objectives of:

• Authorization
• Validity
• Proper recording
• Accountability and comparison
• Protection and limited access. 

The new management along with its auditors decide that the audit shall be done in a cycle approach and has identified 5 transaction cycles based on its business activities.

• Sales, receivables and cash receipts cycle
• Purchases, payables and cash disbursement cycle
• Inventory and production cycle
• Personnel and payroll cycle
• Property, plant and equipment cycle. 

Advice the Production Manager which of the following control achieves the objective of Protection and limited access to assets.

PRS Company had recent changes in its management and the new management is not happy with the setup and functioning of its existing internal controls. The management has requested its Internal auditors to review and supervise the implementation of its new internal control system that achieves its objectives of:

• Authorization
• Validity
• Proper recording
• Accountability and comparison
• Protection and limited access. 

The new management along with its auditors decide that the audit shall be done in a cycle approach and has identified 5 transaction cycles based on its business activities.

• Sales, receivables and cash receipts cycle
• Purchases, payables and cash disbursement cycle
• Inventory and production cycle
• Personnel and payroll cycle
• Property, plant and equipment cycle. 

Advice the HR Manager which of the following control achieves the objective of Authorization. 

PRS Company had recent changes in its management and the new management is not happy with the setup and functioning of its existing internal controls. The management has requested its Internal auditors to review and supervise the implementation of its new internal control system that achieves its objectives of:

• Authorization
• Validity
• Proper recording
• Accountability and comparison
• Protection and limited access. 

The new management along with its auditors decide that the audit shall be done in a cycle approach and has identified 5 transaction cycles based on its business activities.

• Sales, receivables and cash receipts cycle
• Purchases, payables and cash disbursement cycle
• Inventory and production cycle
• Personnel and payroll cycle
• Property, plant and equipment cycle. 

Advise the General Manager which of the following control achieves the objective of accountability and comparison. 

S, CPA is engaged to audit the financial statements of A2Z Suppliers Inc. for the year ended December 31, Year 1. S obtained and documented an understanding of A2Z’s internal control relating to accounts receivable and assessed risk of material misstatement relating to accounts receivable as high. S requested and obtained from A2Z an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 1 and sent positive confirmation requests to a sample of the customers. Subsequently, S tested the accuracy of the aged accounts receivable schedule. S has asked P, the staff assistant assigned to the engagement, to follow up on the returned confirmations. Assume each confirmation is Material if the potential misstatement is projected to the population.

A2Z Suppliers Inc.

100 Shopping way,

Rich city, USA 

                                                    January 10, Year 2

                                                    Confirmation #1

Alpha co.

Alpha street, 

Rich city USA

Dear Mr. A,

Our auditors, S CPA is currently auditing our financial statements. To facilitate this audit, please confirm the balance due to us as of December 31, Year 1, which is shown in our records as $22,000. Please indicate in the space below whether this is in agreement with your records. If there are exceptions, plase provide any information that will assist the auditor in reconciling the difference. 

Please mail your reply directly to S CPA. A stamped, self-addressed envelope is enclosed for your convenience. 

Sincerely,

JB, Controller

A2Z Supplier Inc. 

————————————————————————————–

To S CPA,

The amount shown above is correct as of December 31, year 1, except as follows:

Yes, we ordered $22,000 worth of merchandise from A2Z in early December, however, we have mailed A2Z a check for $22,000 on 12th December Year 1. 

Thanks,

A. 

P further found out that the check was received and deposited on 18th December Year 1, but was posted to the wrong customer account. Assume the books of A2Z are not yet closed. 

Which of the following actions should P not take in with regard to the confirmation reply sent by Alpha co.?

S, CPA is engaged to audit the financial statements of A2Z Suppliers Inc. for the year ended December 31, Year 1. S obtained and documented an understanding of A2Z’s internal control relating to accounts receivable and assessed risk of material misstatement relating to accounts receivable as high. S requested and obtained from A2Z an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 1 and sent positive confirmation requests to a sample of the customers. Subsequently, S tested the accuracy of the aged accounts receivable schedule. S has asked P, the staff assistant assigned to the engagement, to follow up on the returned confirmations. Assume each confirmation is Material if the potential misstatement is projected to the population.

A2Z Suppliers Inc.

100 Shopping way,

Rich city, USA 

                                                    January 10, Year 2

                                                    Confirmation #2

Beta co.

Beta street, 

Rich city USA

Dear Mr. B,

Our auditors, S CPA is currently auditing our financial statements. To facilitate this audit, please confirm the balance due to us as of December 31, Year 1, which is shown in our records as $13,000. Please indicate in the space below whether this is in agreement with your records. If there are exceptions, plase provide any information that will assist the auditor in reconciling the difference. 

Please mail your reply directly to S CPA. A stamped, self-addressed envelope is enclosed for your convenience. 

Sincerely,

JB, Controller

A2Z Supplier Inc. 

———————————————————————————

To S CPA,

The amount shown above is correct as of December 31, year 1, except as follows:

I use an accounts payable voucher system by individual invoice. I can’t verify $13,000, but A2Z is one of my regular suppliers. I am sure I probably owe them something. 

Thanks,

B, Accounting manager

Date: 01-14-Year2

Which of the following actions should P not take with regard to the confirmation reply sent by Beta co.?

S, CPA is engaged to audit the financial statements of A2Z Suppliers Inc. for the year ended December 31, Year 1. S obtained and documented an understanding of A2Z’s internal control relating to accounts receivable and assessed risk of material misstatement relating to accounts receivable as high. S requested and obtained from A2Z an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 1 and sent positive confirmation requests to a sample of the customers. Subsequently, S tested the accuracy of the aged accounts receivable schedule. S has asked P, the staff assistant assigned to the engagement, to follow up on the returned confirmations. Assume each confirmation is Material if the potential misstatement is projected to the population.

A2Z Suppliers Inc.

100 Shopping way,

Rich city, USA 

                                                    January 10, Year 2

                                                    Confirmation #3

Charlie co.

Charlie street, 

Rich city USA

Dear Mr. C,

Our auditors, S CPA is currently auditing our financial statements. To facilitate this audit, please confirm the balance due to us as of December 31, Year 1, which is shown in our records as $17,500. Please indicate in the space below whether this is in agreement with your records. If there are exceptions, plase provide any information that will assist the auditor in reconciling the difference. 

Please mail your reply directly to S CPA. A stamped, self-addressed envelope is enclosed for your convenience. 

Sincerely,

JB, Controller

A2Z Supplier Inc. 

————————————————————————————–

To S CPA,

The amount shown above is correct as of December 31, year 1, except as follows:

…………………………………………………………………………………………………. 

Thanks,

 

Note: a)The confirmation was returned by the postal service as ” Return to Sender –No such address at this location.”

          b) The outstanding balance falls under the 30-60 days category in the ageing of debts.  

Which of the following actions should P not take in with regard to the confirmation?

S, CPA is engaged to audit the financial statements of A2Z Suppliers Inc. for the year ended December 31, Year 1. S obtained and documented an understanding of A2Z’s internal control relating to accounts receivable and assessed risk of material misstatement relating to accounts receivable as high. S requested and obtained from A2Z an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 1 and sent positive confirmation requests to a sample of the customers. Subsequently, S tested the accuracy of the aged accounts receivable schedule. S has asked P, the staff assistant assigned to the engagement, to follow up on the returned confirmations. Assume each confirmation is Material if the potential misstatement is projected to the population.

A2Z Suppliers Inc.

100 Shopping way,

Rich city, USA 

                                                    January 10, Year 2

                                                    Confirmation #4

Dora co.

Diego street, 

Rich city USA

Dear Ms. D,

Our auditors, S CPA is currently auditing our financial statements. To facilitate this audit, please confirm the balance due to us as of December 31, Year 1, which is shown in our records as $45,000. Please indicate in the space below whether this is in agreement with your records. If there are exceptions, plase provide any information that will assist the auditor in reconciling the difference. 

Please mail your reply directly to S CPA. A stamped, self-addressed envelope is enclosed for your convenience. 

Sincerely,

JB, Controller

A2Z Supplier Inc. 

————————————————————————————–

To S CPA,

The amount shown above is correct as of December 31, year 1, except as follows:

Mailed a check for the full amount on 01-07-Year2. The merchandise was only recevied on 12-26-Year1. 

Thanks,

D. 

Which of the following actions should P take with regard to the confirmation reply sent by Dora co.?

S, CPA is engaged to audit the financial statements of A2Z Suppliers Inc. for the year ended December 31, Year 1. S obtained and documented an understanding of A2Z’s internal control relating to accounts receivable and assessed risk of material misstatement relating to accounts receivable as high.

S requested and obtained from A2Z an aged accounts receivable schedule listing the total amount owed by each customer as of December 31, year 1 and sent positive confirmation requests to a sample of the customers. Subsequently, S tested the accuracy of the aged accounts receivable schedule. S has asked P, the staff assistant assigned to the engagement, to follow up on the returned confirmations. Assume each confirmation is Material if the potential misstatement is projected to the population.

A2Z Suppliers Inc.

100 Shopping way,

Rich city, USA 

                                                    January 10, Year 2

                                                    Confirmation #5

Eagle co.

Eagle street, 

Rich city USA

Dear Mr. E,

Our auditors, S CPA is currently auditing our financial statements. To facilitate this audit, please confirm the balance due to us as of December 31, Year 1, which is shown in our records as $31,000. Please indicate in the space below whether this is in agreement with your records. If there are exceptions, plase provide any information that will assist the auditor in reconciling the difference. 

Please mail your reply directly to S CPA. A stamped, self-addressed envelope is enclosed for your convenience. 

Sincerely,

JB, Controller

A2Z Supplier Inc. 

————————————————————————————–

To S CPA,

The amount shown above is correct as of December 31, year 1, except as follows:

No way! A2Z promised these goods in 10 days on December 7th. When we did not receive them, I cancelled the order on December 17th. Superior wholesaling shipped us similar goods overnight. 

Thanks,

E, General Manager. 

January 15th, Year 2

Which of the following actions should P not take in with regard to the confirmation reply sent by Eagle Co.?

S CPA, an independent auditor, audited the consolidated financial statement of ABC corp and all of its subsidiaries except for AtoZ for the year ended December 31, year 1 and year 2. P is an audit assistant and is putting together a report for S to finalise. Advice P on the various independent factual situations an auditor might encounter in conducting an audit and what kind of opinion should S give, based on the situation.  

In auditing the long-term investments account, P is unable to obtain audited financial statements for an investee located in a foreign country. P concludes that sufficient appropriate audit evidence regarding this investment cannot be obtained.  

S CPA, an independent auditor, audited the consolidated financial statement of ABC corp and all of its subsidiaries except for AtoZ for the year ended December 31, year 1 and year 2. P is an audit assistant and is putting together a report for S to finalise. Advice P on the various independent factual situations an auditor might encounter in conducting an audit and what kind of opinion should S give, based on the situation.

Due to recurring operating losses and working capital deficiencies, P has substantial doubt about ABC’s ability to continue as a going concern for a reasonable period of time. However, the financial statement disclosures concerning these matters are adequate. 

S CPA, an independent auditor, audited the consolidated financial statement of ABC corp and all of its subsidiaries except for AtoZ for the year ended December 31, year 1 and year 2. P is an audit assistant and is putting together a report for S to finalise. Advice P on the various independent factual situations an auditor might encounter in conducting an audit and what kind of opinion should S give, based on the situation.

ABC has issued its financial statements that present financial position and results of operations but omits the related statement of cash flows. Management discloses in the notes to the financial statements that it does not believe the statement of cash flows to be a useful financial statement. 

S CPA, an independent auditor, audited the consolidated financial statement of ABC corp and all of its subsidiaries except for AtoZ for the year ended December 31, year 1 and year 2. P is an audit assistant and is putting together a report for S to finalise. Advice P on the various independent factual situations an auditor might encounter in conducting an audit and what kind of opinion should S give, based on the situation.

ABC has disclosed in the notes to the financial statements certain lease obligations. P believes that the failure to capitalise these leases is a departure from generally accepted accounting principles.

S CPA, an independent auditor, audited the consolidated financial statement of ABC corp and all of its subsidiaries except for AtoZ for the year ended December 31, year 1 and year 2. P is an audit assistant and is putting together a report for S to finalise. Advice P on the various independent factual situations an auditor might encounter in conducting an audit and what kind of opinion should S give, based on the situation.  

S has decided to take responsibility for the work of R, another CPA who audited AtoZ a wholly owned subsidiary of ABC and issued an unqualified opinion. The total assets and revenues of the subsidiary represent 15% and 17%, respectively, of the total assets and revenues of ABC.   

P has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling. In the audit of a client’s accounts receivable balance. Few, if any misstatements of account balance overstatement are expected. P plans to use the following PPS sampling table.

TABLE

RELIABILITY FACTORS FOR ERRORS OF OVERSTATEMENT

[table1 colalign=”left|right|right|right|right|right”]

; ; ; ; ; ;

Number of overstatements; ; Risk of incorrect acceptance ; ;

_______________;_______________;_______________;_______________;_______________;_______________;

Misstatements; 1%; 5%; 10%; 15%; 20%

0; 4.61; 3.00; 2.31; 1.90; 1.61

1; 6.64; 4.75; 3.89; 3.38; 3.00

2; 8.41; 6.30; 5.33; 4.72; 4.28

3; 10.05; 7.76; 6.69; 6.02; 5.52

4; 11.61; 9.16; 8.00; 7.27; 6.73

[/table1]

Identify which of the following is not an advantage of using PPS sampling over classical variables sampling.

P has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling. In the audit of a client’s accounts receivable balance. Few, if any misstatements of account balance overstatement are expected. P plans to use the following PPS sampling table.

TABLE

RELIABILITY FACTORS FOR ERRORS OF OVERSTATEMENT

[table1 colalign=”left|right|right|right|right|right”]

; ; ; ; ; ;

Number of overstatements; ; Risk of incorrect acceptance ; ;

_______________;_______________;_______________;_______________;_______________;_______________;

Misstatements; 1%; 5%; 10%; 15%; 20%

0; 4.61; 3.00; 2.31; 1.90; 1.61

1; 6.64; 4.75; 3.89; 3.38; 3.00

2; 8.41; 6.30; 5.33; 4.72; 4.28

3; 10.05; 7.76; 6.69; 6.02; 5.52

4; 11.61; 9.16; 8.00; 7.27; 6.73

[/table1]

Calculate the sampling interval P should use give the following information:

[table1 colalign=”left|right”]

; ; 

Tolerable misstatment; $15,000

Risk of incorrect acceptance; 5%

Number of misstatemnts allowed; 0

Recorded amount of accounts receivable; $450,000

[/table1]

P has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling. In the audit of a client’s accounts receivable balance. Few, if any misstatements of account balance overstatement are expected. P plans to use the following PPS sampling table.

TABLE

RELIABILITY FACTORS FOR ERRORS OF OVERSTATEMENT

[table1 colalign=”left|right|right|right|right|right”]

; ; ; ; ; ;

Number of overstatements; ; Risk of incorrect acceptance ; ;

_______________;_______________;_______________;_______________;_______________;_______________;

Misstatements; 1%; 5%; 10%; 15%; 20%

0; 4.61; 3.00; 2.31; 1.90; 1.61

1; 6.64; 4.75; 3.89; 3.38; 3.00

2; 8.41; 6.30; 5.33; 4.72; 4.28

3; 10.05; 7.76; 6.69; 6.02; 5.52

4; 11.61; 9.16; 8.00; 7.27; 6.73

[/table1]

Calculate the Sample size P should use give the following information:

[table1 colalign=”left|right”]

; ; 

Tolerable misstatment; $15,000

Risk of incorrect acceptance; 5%

Number of misstatemnts allowed; 0

Recorded amount of accounts receivable; $450,000

[/table1]

P has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling. In the audit of a client’s accounts receivable balance. Few, if any misstatements of account balance overstatement are expected. P plans to use the following PPS sampling table.

TABLE

RELIABILITY FACTORS FOR ERRORS OF OVERSTATEMENT

[table1 colalign=”left|right|right|right|right|right”]

; ; ; ; ; ;

Number of overstatements; ; Risk of incorrect acceptance ; ;

_______________;_______________;_______________;_______________;_______________;_______________;

Misstatements; 1%; 5%; 10%; 15%; 20%

0; 4.61; 3.00; 2.31; 1.90; 1.61

1; 6.64; 4.75; 3.89; 3.38; 3.00

2; 8.41; 6.30; 5.33; 4.72; 4.28

3; 10.05; 7.76; 6.69; 6.02; 5.52

4; 11.61; 9.16; 8.00; 7.27; 6.73

[/table1]

Calculate the projected error for misstatement #3:

[table1 colalign=”left|right|right|right”]

; ; ; ;

; Recorded amount; Audit amount; Sampling interval

Misstatement #1; $4,000; $3,200; $5,000

Misstatement #2; $2,500; $0; $5,000

Misstatement #3; $8,000; $6,000; $5,000

[/table1]

P has decided to use probability-proportional-to-size (PPS) sampling, sometimes called dollar-unit sampling. In the audit of a client’s accounts receivable balance. Few, if any misstatements of account balance overstatement are expected. P plans to use the following PPS sampling table.

TABLE

RELIABILITY FACTORS FOR ERRORS OF OVERSTATEMENT

[table1 colalign=”left|right|right|right|right|right”]

; ; ; ; ; ;

Number of overstatements; ; Risk of incorrect acceptance ; ;

_______________;_______________;_______________;_______________;_______________;_______________;

Misstatements; 1%; 5%; 10%; 15%; 20%

0; 4.61; 3.00; 2.31; 1.90; 1.61

1; 6.64; 4.75; 3.89; 3.38; 3.00

2; 8.41; 6.30; 5.33; 4.72; 4.28

3; 10.05; 7.76; 6.69; 6.02; 5.52

4; 11.61; 9.16; 8.00; 7.27; 6.73

[/table1]

Calculate the total projected misstatement if the following three misstatements were discovered in a PPS sample.

[table1 colalign=”left|right|right|right”]

; ; ; ;

; Recorded amount; Audit amount; Sampling interval

Misstatement #1; $4,000; $3,200; $5,000

Misstatement #2; $2,500; $0; $5,000

Misstatement #3; $8,000; $6,000; $5,000

[/table1]

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item AB-6123 the Auditor’s test count was 434 whereas the client’s records showed a quantity of 484. On inquiry about the difference, the supervisor commented that the variance of 50 units was due to the inventory was in transit and was on the shipping terms F.O.B. He also mentioned that the inventory would be received on September 2, Year 1. 

How should Smith’s audit response be to the above variance situation?

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item HJ-0990 the Auditor’s test count was 11,000 whereas the client’s records showed a quantity of 11,222. On inquiry about the difference, the supervisor commented that the variance of 222 units was due to the inventory being sold to a customer as F.O.B destination terms, and was to be received by the customer on September 2, Year 1. 

How should Smith’s audit response be to the above variance situation?

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item CO-8013 the Auditor’s test count was 197 whereas the client’s records showed a quantity of 203. On inquiry about the difference, the supervisor commented that the variance of 6 units was due to payment being made in advance for a shipment to be received on September 2, Year 1.

How should Smith’s audit response be to the above variance situation?

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item CO-8012 the Auditor’s test count was 800 whereas the client’s records showed a quantity of 786. On inquiry about the difference, the supervisor commented that the variance of 14 units was due to the inventory being received on August 30, year 1 and vendor shipment receipt was not yet recorded.

How should Smith’s audit response be to the above variance situation?

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item WI-5491 the Auditor’s test count was 600 whereas the client’s records showed a quantity of 663. On inquiry about the difference, the supervisor commented that the variance of 63 units was due to the inventory being kept separate for a September 1, year 1 sale and was held on dock for customer pickup. 

How should Smith’s audit response be to the above variance situation?

Smith, the senior audit associate in charge of the audit of Raymond’s Mfg. observed the client’s physical inventory count held on the last day of the company’s fiscal year, August 31, Year 1.

For inventory item MO-6403 the Auditor’s test count was 150 whereas the client’s records showed a quantity of 127. On inquiry about the difference, the supervisor commented that the variance of 23 units was due to the additional items identified as damaged and will be returned to the vendor. 

How should Smith’s audit response be to the above variance situation?

The auditors of Green pen, Inc. obtained the journal entries below as part of the year 2 audit. Advice the audit procedure or action to be taken for the following situations. 

A journal entry was made by the controller on December 31, Year 2 to account for compensation for Year 2 to be paid in Year 3.

Debit Salaries and wages expenses

Credit Accrued liabilities. 

The auditors of Green pen, Inc. obtained the journal entries below as part of the year 2 audit. Advice the audit procedure or action to be taken for the following situations. 

A journal entry was made by the fixed asset manager on December 31, Year 2 to adjust machine’s depreciation expense.

Debit Accumulated depreciation

Credit Depreciation expense

The auditors of Green pen, Inc. obtained the journal entries below as part of the year 2 audit. Advice the audit procedure or action to be taken for the following situations. 

A journal entry was made by the controller on December 30, Year 2 to account for change in asset classification.

Debit Investments held for trading purposes

Credit Investments held-to-maturity

The auditors of Green pen, Inc. obtained the journal entries below as part of the year 2 audit. Advice the audit procedure or action to be taken for the following situations. 

A journal entry was made by the controller on January 1, Year 2 to record the proposed audit adjustments from year 1.

Debit Repairs and maintenance

Credit Accounts payable

The auditors of Green pen, Inc. obtained the journal entries below as part of the year 2 audit. Advice the audit procedure or action to be taken for the following situations. 

A journal entry was made by the controller on December 31, Year 2 to record subsidiary income for year 2.

Debit Investments in stock

Credit Investments income

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

“Significant related-party transactions not in the ordinary course of business”

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

“Promotions, compensation, or other rewards inconsistent with expectations”

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

“Significant bank accounts in tax-haven jurisdictions for which there appears to be no clear business justification”

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

“Large amounts of cash on hand or processed”

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Ineffective board of directors or audit committee oversight over internal control

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Inadequate physical safeguards over cash, investments, or inventory.

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

New accounting, statutory, or regulatory requirements

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Excessive interest by management in maintaining or increasing the entity’s stock price

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Management has significant financial interests in the entity

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Inadequate monitoring of controls, including automated controls and controls over interim financial reporting

Identify if the given scenario is a fraud risk factor relating to misstatements arising from fraudulent financial reporting or fraud risk factors relating to misstatements arising from misappropriation of assets and the associated conditions generally present when fraud occurs. 

Management failing to correct known significant deficiencies on a timely basis