Fraud Risk Assessment

This document provides information about fraud risk assessment, including the factors on which it depends, the main concepts of risk assessment, internal factors to consider, inherent risk, and residual risk. It also includes a fraud risk assessment checklist for any business.

Fraud Risk Assessment

MAIN BODY...................................................................................................................................3
Give short answers for the following questions: .............................................................................3
i.Outline the factors on which fraud risk assessment depends.....................................................3
ii.What are the main concepts about risk assessment?................................................................3
iii.What are the internal factors that should be considered for fraud risk assessment? What is
‘inherent risk’?.............................................................................................................................3
iv.Define the term ‘residual risk’.................................................................................................4
Prepare a fraud - risk assessment check list for any business of your choice..............................4
REFRENCES...................................................................................................................................6

MAIN BODY
Give short answers for the following questions:
i. Outline the factors on which fraud risk assessment depends.
Various factors are there that has been impacting fraud risk assessment which are to be
can be considered on different levels such as entity, behavioural, products and services,
geography, divisions, accounting and business processes, controls, computerized systems, etc. all
these has an very important role to play in helping in doing assessment of fraud within an
organization (McNeal, 2019).
ii. What are the main concepts about risk assessment?
The main concept that is being prepared within an organisation for risk assessment is
stakeholders should be allowed to attract more and more investors. Main aim of this type of
assessment is to help an organisation get aware about the factor and situation which can
drastically impact future growth of organisation. Risk assessment concept deals with those
factors that is responsible for making an analysis possible which results into making an
organisation focus upon control risk which can result into collapsing of growth of organisation.
iii. What are the internal factors that should be considered for fraud risk
assessment? What is ‘inherent risk’?
Journal Entry Testing is that kind of internal factor that is going to play an important role
in making an organization identify the fraud that has been done. As if an employee or employer
has to commit a crime then changes are required to be made within the financial records of an
organization. In order to catch a fraud testing of journal entry is going to be done. In a financial
audit, inherent risk is most likely to occur when transactions are complex, or in situations that
require a high degree of judgment in regard to financial estimates (Epstein and Ramamoorti,
2016). Inherent risk is that kind of risk which is important for an organization as it makes in
analyzing of those complex kind of mechanism which impacts smoothness of an organization
and activities taking place in it.

iv. Define the term ‘residual risk’
Residual risk is that kind of risk that is being related to danger that has been taking place
within an organisation. This is accruing in an organisation after the disturbance that has been
caused after the amount of risk or danger associated with an action. Such kind of situation that
has happened is known as residual risk (Epstein and Ramamoorti, 2016).
Prepare a fraud - risk assessment check list for any business of your choice
Fraud risk assessment Yes/No Rating out of 10
Is there formal and internal audit function?
Does the organization posses helpline for fraud
assistance?
Is licensed CPA is there in management team ?
Everyone in the organization is educated or
not?
Training program is there for fraud dealing
techniques?
Are there policies that has been made to deal
with fraud and risk management?
Proper ethical code of conduct is followed
within the organization or not?
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Out of 10/7,
organization is having
good audit functioning
Out of 10/6, helpline is
there but assistance is
not good.
Out of 10/8, this is
required fro making
management strong.
Out of 10/5, education
is there but still more
of quality education is
required.
Out of10/6, training is
good but still
techniques taught are
old and impractical.
Out of 10/ 3, policies
are rigid and are not
flexible.
Out of 10/5, only at
sometime it is being
followed bu not all
time which makes
discipline and order to
be disturbed.

REFRENCES
Books and journals
Epstein, B.J. and Ramamoorti, S., 2016. Today's Fraud Risk Models Lack Personality Auditing
with'Dark Triad'Individuals in the Executive Ranks. CPA Journal. 86(3).
McNeal, A., 2019. What's Your Fraud IQ? This Month: Preparing for a Fraud Risk
Assessment. Journal of Accountancy. 228(5). p.22.
Morang, S. and Sobel, P., 2017. Turning up the heat on fraud: a fraud risk assessment can help
auditors take the organization's ethical temperature. Internal Auditor. 74(1). pp.18-20.
Mu, E. and Carroll, J., 2016. Development of a fraud risk decision model for prioritizing fraud
risk cases in manufacturing firms. International Journal of Production Economics. 173.
pp.30-42.
Mubako, G. and O'Donnell, E., 2018. Effect of fraud risk assessments on auditor skepticism:
Unintended consequences on evidence evaluation. International Journal of
Auditing. 22(1). pp.55-64.
Spink, J and et. al, 2019. The application of public policy theory to the emerging food fraud risk:
Next steps. Trends in Food Science & Technology. 85. pp.116-128.