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Auditing Assignment | Fraud Auditing Assignment
9 Pages2445 Words253 Views
Added on 2020-01-28
Auditing Assignment | Fraud Auditing Assignment
Added on 2020-01-28
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Auditing1
Table of ContentsINTRODUCTION................................................................................................................................31. Identify and explain fraud risk factor in relation to the audit of Hot line....................................32. Incentives, pressures and opportunities to commit financial report fraud and attitude and rationalisation to justify a fraud.......................................................................................................53. Recommend internal control mechanism to mitigate risk of fraud company's financial statement..........................................................................................................................................6CONCLUSION ...................................................................................................................................7REFERENCES.....................................................................................................................................82
INTRODUCTIONAuditing is the process of systematic examination of company' books, invoices, vouchers,accounts and documents so as to verify company's financial statement whether they represent trueor fair business position or not. Such process mainly aims to test the accuracy and reliability of thefinancial accounts so that all the internal or external users can obtain prominent information fortheir decision-making purpose. For the present assignment, fraud auditing will be conducted for Hotline limited, It is a national surf wear retail chain situated through out Australia. It is also specializein expensive swimwear and summer resort wear. The report will explain fraud risk associated withdifferent matters given in the assignment. Moreover, the report will demonstrate that how internalcontrol mechanism can prevent Hot Line from such risky factors.1. Identify and explain fraud risk factor in relation to the audit of Hot lineMatter Fraud riskExplanation 1Breach of covenant Jeopardy of bonus No-refinancing document Hot line's CFO breached his KPI of maintainingcovenants. Thus, it is a kind of fraud risk createdby CFO. It will ultimately results in loss of hisbonus because of non satisfying KPIs. Further, inthe re-financing process, none of the documenthas been provided by Big Bank and also Hot linedid not attempted to secure financing from otherfinancial institutions (Kuhn and Sutton, 2010).Thus, it will results in arising financial problemsin the business. 2Making fictitious invoices forpurchase of goods andservices. Over invoices by makinginvoices by some extentamount up to the maximumlimit of 50000.Creating invoices payable tohimselfJamie Potts can involve in various purchase fraudschemes which results in loss to the Hot Line. Hecan create fictitious invoices that do not representby any legitimate purchase. He also can chargeinflated prices which increase Hot Line'sexpenditures in turn, it can not meet theirforecasted profits. Along with this, payable clerkcan also create invoices for payment to himself.Further, duplicate invoices can be created toprovide benefit to himself by conductingfraudulent activities (DeFond and Zhang, 2014). 3
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