Auditing Theory and Practice: Fraud Detection and Prevention in BC Iron Limited
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This presentation discusses the auditing procedures for fraud detection, aggressive accounting policies, and other misappropriations in BC Iron Limited. It also highlights the responsibilities of auditors and how fraud can be fixed. The presentation is based on ASA 200 and 240.
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Auditing Theory and Practice
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Introduction Fraud, aggressive policies and other misappropriations BC Iron Limited is a smaller mining company where they manage operations such as mining, crushing as well as screening and trucking The Auditing Standard used in this study is ASA 200 and 240 as it discuss about fraud detection and how to minimize it as far as possible. Risk-based approach had been used in the study where risk need to be appropriately identified as well as managed.
Fraud Fraud can be defined as a the intentional false representation or concealment of a material fact so that the company show wring misappropriations and hide facts from the auditors.
Auditor responsibilities Auditing procedures for Fraud detection Auditing procedures for aggressive accounting policies Auditing procedures for any other misappropriations Plan and perform the audit for obtaining reasonable assurance whether the financial statements are free of material misstated or caused by any other error or fraud Prepares and examines the financial records They assess financial operations as well as work to make sure that the business is running in an effective way.
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Auditing procedures for Fraud detection In accordance with ASA240, the main objective of an auditor is to evaluate as well as assess the risk associated from material misstated figures present in the financial report because of any types of fraud (Rosenberger and Lachin 2015). In order to assess sufficient audit evidence on matters relating to assessed risks, it is needed for an auditor to design and implement suitable responses. Furthermore, the auditor need to respond appropriately to fraud or suspected fraud at the time of audit practices.
Auditing procedures for aggressive accounting policies Most of the Business Corporation involves in conducting tax transparency measures into their Corporate Social Responsibility agenda that get along with other relatable charitable activities as well as affirmative action employment policies and other environmental initiatives (Power and Gendron 2015). In order to prevent risk, company need to transfer payments as well as create document that explain how it is arrived at particular market value. In order to deal that, company need to conduct an economic analysis of its industry as well as aim at offering market research data in displaying the fact that price is justified. Therefore, market research firms need to work upon creation of compliance tax planning strategies in order to reduce money owning (Alles, Kogan and Vasarhelyi 2018).
Auditing procedures for any other misappropriations In accordance to International Standard on Auditing 240, the main objective of an auditor is to evaluate as well as assess risk occurred from material misstated figures present in the financial statements because of fraudulent activities (Linet al.2015).
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what type of fraud occur in BC iron according to the report On analysis, it is found out that the shareholders of BC Iron Limited and even the potential investors understand about the risk involved in the stock and the features that can affect the portfolio. It is necessary for an investor to deal with two types of risk that affect market value of BC Iron Limited (Hargie 2016). To analyze both the risks, the first risk is company specific that has the potential to get diversified away and this can be done by investing in other company for lowering exposure to one specific stock. On the other hand, the other risk that needs proper attention on market risk that cannot be diversified and lead to consider macroeconomic factors that affects overall stock in the marketplace (Amir-Mohammadian, Chong and Skalka 2016). There are various features of stock expose to different levels of market risk. In that, commonly used metric will be used to measure the market risk and even the broad market index as it shows beta value for the same. Furthermore, any stock with a greater than one is treated more volatile by nature as compared to beta that is less volatile at the same time (Hardinget al.2016).
How the fraud can be fixed Constant monitoring of financial report of any company will lead to find ways on how to reduce fraud in the upcoming financial years Auditor should engage in identifying fraudulent activities as taken place at BC Iron Limited. The fraud can be detected by monitoring the financial statement of BC Iron Limited If there is any sudden increase or decrease percentage present during 3 financial years, there is always a doubt of fraud practices or misappropriation of figures.
Conclusion and recommendations It is recommended that companies should engage in ethical practices so that they face no issue at the time of audit activities. The management should not hide any important information from the auditors as the company can face consequences in the future.
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