Audit Fraud and Error: Risks, Responsibilities, and Actions Taken by Ted Baker During COVID-19

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Executive Summary
Auditors of the companies are required to show their expertise and extreme level of
knowledge for detecting the errors and frauds taking place in various companies. The
businesses also have to make sure that they do not make any known error in their records.
Happening of Covid has brought lots of risks to the companies and the way they look towards
financial reporting. It has also impacted the working style of the auditors and has made them
prone to the ethical risks. Thus, it is important for the companies to look after the behaviour
of the auditors so that there are non chances of fraud.
The report discuss about the Ted baker company and its main operating activities. It
gathers information about the responsibilities of management and auditors working externally
for preventing fraud in organisations along with detecting them on occurrence. This would
reduce the chances of errors in the statements. It also explains the manner in which the crises
of Covid 19 has created a heightened risk of errors and frauds while reporting about the
financial reports of company. This will help TED Baker in acting more vigilant while asking
for audit. It also analyse the manner in which the corporate governance committee of Ted
Baker addressed to the challenges of Audit fraud. Their is also a discussion on the ways in
which the ethical threats has arisen due to occurrence of pandemic and the manner in which
it can be safeguarded in order to maintain ethics in the audit functioning of organisations- at
both levels – internal as well as external. Through this the company can assure that the
audited financial statements are fair and can be used for analysing the position of the
organisation.
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Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................5
Summarise the main operating activities of the company.................................................................5
Explain the responsibilities of the management and external auditors regarding fraud prevention
and detection. Refer to the content of the relevant ISA....................................................................5
Main Finding..........................................................................................................................................6
Increased Fraud.................................................................................................................................6
Elaborate why and how the covid – 19 crisis has increased the risk of fraud and improper financial
reporting. Also taken the particular issues of the company Ted Baker..............................................6
Minimised Risk...................................................................................................................................8
Critically analyse the actions taken by the company for responding to risks of fraud and improper
financial reporting at the time of COVID-19......................................................................................8
Ethical Risks.....................................................................................................................................10
Critically discuss the ethical threats for the external auditors that arose due to Covid-19..............10
Conclusion...........................................................................................................................................11
Bibliography.........................................................................................................................................11
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Introduction
Auditing refers to the process of examining the financial statements of the companies
and recognising and reporting all sort of errors and frauds that took place in them. Their are
several norms that these auditors are required to follow to bring transparency and reliability
in the reports presented by the firms such as independence. Their are two types of auditor,
internal and external (Bananuka and et. al., 2018). The company chosen in this report is Ted
Bakers. It is a luxury cloth retailing store based in UK. It is listed in London Stock exchange
and deals in clothings of men, women and children. The report is divided into five sections.
The first section discusses about the company. The next part discusses the responsibilities of
the management and auditor for managing the fraud. Third portion analyses the increase in
the risk of fraud in financial reporting at the time of Covid. Forth portion evaluates the
actions taken by the company for combatting the risks of misstatement and frauds. Fifth part
checks out for the change in the ethical threats for the auditors.
Summarise the main operating activities of the company
Ted Baker plc is a British luxury clothing brand. It was founded in the year 1988, in
Glasgow, Scotland. The founder of this Ted Baker is Ray Kelvin. The headquarter of plc are
situated in London, England. Ted Baker has grown steadily from its first ever original shirt
(Chen and et. al., 2018). At this day, Ted Bakers offers a wide variety of range of collection
like menswear, womenswear, global, accessories, fragrance, skin wear, footwear and
watches. The products are also sold to other retailers which are Ted baker trustees. The
company has spread its business in and around the world. Manufacturing and selling is the
main operations of Ted Baker and they hold ethical manufacturing units in the UK, India,
China and Portugal. It is listed on the London Stock Exchange (Bleibtreu and Stefani, 2018).
Explain the responsibilities of the management and external auditors regarding fraud
prevention and detection. Refer to the content of the relevant ISA.
Fraud refers to the intentional act by an individual or a group of individuals among
the management of the that involves the use of deception to gain illegal advantage. In context
to Audit, fraud can be defined as an unlawful act that has been undertaken to present a good
image of the company in front of public and government. In an organisation having the sole
purpose of profit earning, management can involve themselves into such acts. External
auditors here are required to recognize the possibility of these frauds and provide fair analysis
and reports to the different stakeholders of the business (Choudhary, Merkley and Schipper,
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