Fraud Risk Assessment for Business: Checklist, Concepts, and Factors

This assignment provides a comprehensive overview of fraud risk assessment, addressing key factors, concepts, and practical applications. It begins by outlining the factors influencing fraud risk assessment, encompassing various levels such as entity, behavioral, and processes. The assignment then explores core concepts of risk assessment, emphasizing the importance of stakeholder awareness and the identification of potential threats. It delves into internal factors crucial for fraud risk assessment, specifically highlighting journal entry testing and defining inherent risk. The assignment further defines and explains residual risk. Finally, the assignment culminates in the creation of a fraud risk assessment checklist tailored for a business. This checklist helps in managing and mitigating fraud risks, covering aspects like fraud schemes, control assessments, and business processes. The assignment includes references to relevant academic literature.

Fraud Risk Assessment

INTRODUCTION.........................................................................................................................4
MAIN BODY..................................................................................................................................4
Give short answers for the following questions:.........................................................................4
i. Outline the factors on which fraud risk assessment depends...............................................4
ii. What are the main concepts about risk assessment?............................................................4
iii. What are the internal factors that should be considered for fraud risk assessment? What is
‘inherent risk’?.............................................................................................................................4
iv. Define the term ‘residual risk’..............................................................................................5
Prepare a fraud - risk assessment check list for any business of your choice.............................5
CONCLSUION..............................................................................................................................5
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 organization 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 organization get aware about the factor and situation which can
drastically impact future growth of organization. Risk assessment concept deals with those
factors that is responsible for making an analysis possible which results into making an
organization focus upon control risk which can result into collapsing of growth of organization.
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 organization. This is accruing in an organization 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.
Prepare a fraud - risk assessment check list for any business of your choice
Check list is that kind of method by which it can be checked that an organization is
progressing or not( Mu and Carroll, 2016). Fraud risk assessment is that kind of check list which
makes an organization like LTWD ltd to manage factors and seeking that they are not impacted
in negative manner. Further risk assessment of fraud is done through check list as follows:
Fraud scheme Inherent Risk Control
Assessment
Residual risk Business process
General fraud Risk involved in
such fraud is that
an organization
is being
impacted in
negative manner
During this
process, auditors
and other team
members
determine the
controls that
have been put in
place to prevent
fraud and
mitigate the
effects of a
particular fraud
scheme
As per this fraud
risk fraud
involved is
more so
calculation loos
is required to be
accurate to cover
it fully.
It is that kind of
risk in which
process of
business like
cash and payroll
is been
explained.
Fraudulent
statements
In this risk is
involved and
such settlement
may have
sometimes
negative impact
on the person.
In order to
control these
kinds of frauds
various kinds of
this and
mitigation
impact has to be
seen
According to
this settlement of
these kind of
fraud should
include all kind
of calculation
and valuation of
loss being faced
by and
organization
Such settlement
is require to seek
that employee is
kept at payrole
or is an
permanent
employee.
Improper
disclosures
In this kind of
discloser there is
no proper
disclosure of any
kind of activity
that has taken
place
For this control
assessment
should be there
and proper
arrangement of
team that gives
advice related to
factors that are
responsible for
Various
calculations that
is being done
over various
disclosures that
has been made
by employee
In this business
process that is
being followed
is based on cash
because it is
related to
disclosure in
improper
manner

it.

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.