Auditing Report: Internal Control, Fraud, ISA315, and Case Study

This report delves into the critical aspects of auditing and internal control, defining internal control as a process to achieve organizational objectives, ensure reliable financial reporting, and comply with regulations. It explores the five components of internal control: the control environment, risk assessment, information systems, control activities, and monitoring. The report connects the advantages of internal control to external audits, emphasizing fraud prevention and the use of internal control walkthroughs. It also addresses the limitations of internal controls, such as human error and collusion. The report includes an analysis of a recent fraud case involving SPRING Singapore, highlighting internal control breaches and the resulting financial losses. Finally, it offers suggestions for strengthening internal controls and concludes by summarizing the key factors influencing internal control effectiveness and their impact on the audit process. The report leverages academic sources to support its arguments and analysis.

Running head: AUDITING
Auditing
Name of Student:
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Table of Contents
Introduction......................................................................................................................................2
Five component of internal control & model governing Internal Control with ISA315.................2
Linking the advantage of internal control to external audit.............................................................4
Limitation of Internal Control.........................................................................................................4
Analysis of Internal control with recent case and trend of organisation threat of fraud.................5
Suggestion........................................................................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

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Introduction
Internal control (IC) is defined as the process for ensuring achievement of the
organisational objective and adding to operational effectiveness and efficiency. Internal control
ensures the reliable reporting of the various aspects of the financial reporting and the state the
facts for compliance of the laws in an organisation. The similarity in the internal and the external
audit has been seen in the nature of the audit process. Both the process aims to assess the
possibility of fraud or theft. In addition to this, both the process is associated to compare the
regulations and the laws with the actual operation of the firm (Singh et al., 2014).
Five component of internal control & model governing Internal Control with ISA315
The various types of the division of the internal control is seen to take into consideration
various types of the consideration which has been seen to state the purpose of SSA and useful
framework for the auditors to consider the various types of the entity’s internal control. The
factors affecting the internal control have been further based on control environment, assessment
of the risk procedure of the entity. It has been further seen to be related to the consideration of
the various types of the relevant financial reporting, communication and business process. Some
of the other components have been further considered as per the control activities and monitor of
the control techniques (Lin etal., 2014).
The five components of the internal control of the entity have been discussed below as
follows:
1. The control environment
2. Process of risk assessment of the entity

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3. Information system based on the associated business process linked with the financial
communication and reporting
4. Control Activities
5. Monitoring of the control activities
It has been further seen that as per the guidelines of SSA, the main contributing factors for
the internal control has been identified with the implementation and maintenance of reasonable
assurance for the achievement of the entities objective. This has been further associated to ensure
the reliability and effectiveness of the financial reporting and maintain the overall
efficiency(Chang, Yen, Chang, & Jan, 2014). As per the guidelines of SSA controls refers to the
consideration of one or more components of the internal control. It has been further discerned
that the model for the internal control governance is implemented by the Board of Directors and
risk management system (Kubuabola, 2013).
Linking the advantage of internal control to external audit
The primary purpose of IC is to assist an organisation in screening, detection and prevention of
fraud. The linking of the external audit has been seen to be thoroughly revised with the entire
range of the transaction process. The internal control of the audit has been further seen to be
proving the main form of the walkthrough based on the business process and verification of the
financial records. The external auditors are also seen to determine the computer systems to
perform correctly. The internal controls are further seen to be large enough for the employment
of the individual’s record keeping which may vary as per the hiring of highly qualified
accountant. The purpose of linking internal audit back to external audit has been mainly seen
with periodic meeting off both the internal and the external auditors. It has been further seen that

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the various linking of the external and internal audit has been further seen to be conducive for
avoiding redundancy in the task(He et al.,2017). In has been further seen that the exchange
between the two groups will be able to ensure better coordination and in understanding the
individual responsibilities. By maintaining the aforementioned measures the organisation has
been able to maintain the data in a better way and ensure more integrity in the internal control
(Badara & Saidin, 2013).
Limitation of Internal Control
Internal control will be effective in providing the entity with only reasonable assurance
on achieving the financial reporting objectives. The likelihood of the achievement is seen to be
inherent with the various types of the consideration of decision making which is may be faulty
and lead to breakdown as per the internal control. The realities of the human judgement in the
decision making process can be as a result of the human error (Lansiluoto et al., 2016). The
controls can be circumvented with the collusion of two or more inappropriate control of
management to override with the internal control. The designing and the implementation of the
controls by the management has been seen with the judgement and the nature and the extent of
the controls, which has been able to implement the extent of the risk. The operation of the
control may also occur due to human error. For instance, the error may be seen to take place due
to design or change of control (Coso, 2013). The different types of the edit checks in the
program of the software which may seen to be designed for the report and this has been further
seen to be exceeded the specified credit limit which is overridden or disabled (Al-Rassas &
Kamardin, 2015).

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Analysis of Internal control with recent case and trend of organisation threat of fraud
The recent case of analysing Internal control and trend of organisational threat of fraud
has been depicted in Standards, Productivity and Innovation Board (SPRING Singapore) which
is seen to be a statutory body under the Ministry of Trade and Industry in Singapore (COSO,
2013). According to the reports report published on 23 May 2017, there had been severe breach
of internal control by two former employees who had been convicted of cheating the statutory
board with an amount of S$ 50000 (Channel NewsAsia, 2017). Soh Hua Xiang and I Shu Hui
had tricked SPRING in approval of a payout in tune of S$ 145000, in which the money had
never been received. Mr Soh is accused of submitting false claims with a total amount of S$
50000 in August 2015. He use the details of 18 sole proprieties of minimarts for lodging claims
associated to the purchase of point-of-sales systems, without the consent of owners. As per the
hearing of the court, it had been discerned that Soh Hua Xiang identified suitable minimarts and
passed the details of the same to I Shu Hui, who was responsible for checking whether owners
had submitted ICV claims before. In case owners had not submitted ICV claims before, Soh Hua
Xiang used the businesses details to lodge fake claims. It was further seen that the fraud involved
creation of fake email address, forged quotations, doctored photographs, receipts and invoices.
He was also accused of forging the signature of the business partners with individuals having
joint bank account. Once the claims were approved, I Shu Hui (finance manager of SPRING)
would approve the disbursement of the ICV grants into bank account of Soh. In this way the both
of them pocketed an amount of S $ 50000 with the use of modus operandi (Daniela & Attila,
2013).
In the recent times, some of the advantages brought to SPRING by IC have been
discerned with consideration of the different types of the measures for conducting the internal

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audit along with the Audit committee. The integrity and reliability in the financial statements has
been further observed with maintaining of regular review system in the organisation.
Suggestion
The likelihood of the achievement is seen to be inherent with the various types of the
consideration of decision making which may be faulty in the default case and lead to effective as
per the implementation of internal control. The realities of the human judgement in the decision
making process can be as a result of the human error. Henceforth, it is recommended to review
the internal control before the application. The application of the of the various types of the
internal control in SPRING has been further seen to based on the association of the internal
auditors and meeting of the standards as per the professional practice of the auditors as set by
Internal, Audit and Investigations team.
Conclusion
The factors affecting the internal control have been further based on control environment,
assessment for the various types of the risk procedure of the entity. It has been further seen to be
related to the consideration of the various types of the relevant financial reporting,
communication and business process. Some of the other components have been further
considered as per the control activities and monitor of the control techniques. The application of
the material on the internal control has been further seen to be conducive in understanding of
components of the internal audit, nature and the scope of the understanding of the relevant
control and controls related to the audit.

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References
Al-Rassas, A. H., & Kamardin, H. (2015). Internal and External Audit Attributes, Audit
Committee Characteristics, Ownership Concentration and Earnings Quality: Evidence from
Malaysia. Mediterranean Journal of Social Sciences.
https://doi.org/10.5901/mjss.2015.v6n3p458
Badara, M., & Saidin, S. (2013). Impact of the effective internal control system on the internal
audit effectiveness at local government level. Journal of Social and Development Sciences,
4(1), 16–23. https://doi.org/10.5923/j.ijfa.20130202.05
Balsam, S., Jiang, W., & Lu, B. (2014). Equity incentives and internal control weaknesses.
Contemporary Accounting Research, 31(1), 178–201. https://doi.org/10.1111/1911-
3846.12018
Chang, S. I., Yen, D. C., Chang, I. C., & Jan, D. (2014). Internal control framework for a
compliant ERP system. Information and Management, 51(2), 187–205.
https://doi.org/10.1016/j.im.2013.11.002
COSO. (2013). Internal Control — Integrated Framework. https://doi.org/978-1-93735-239-4
Coso, T. C. of S. O. of the T. C. (2013). Internal control - integrated framework: executive
summary. New York, (May), 1–20. https://doi.org/978-1-93735-239-4
Daniela, P., & Attila, T. (2013). Internal Audit versus Internal Control and Coaching. Procedia
Economics and Finance, 6, 694–702. https://doi.org/10.1016/S2212-5671(13)00191-3
Former SPRING Singapore employees convicted of fraud. (2017). Channel NewsAsia. Retrieved

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9 November 2017, from http://www.channelnewsasia.com/news/singapore/former-spring-
singapore-employees-convicted-of-fraud-8875920
He, X., Pittman, J. A., Rui, O. M., & Wu, D. (2017). Do social ties between external auditors and
audit committee members affect audit quality? Accounting Review, 92(5), 61–87.
https://doi.org/10.2308/accr-51696
Kubuabola, S. (2013). External Quality Audit. External Quality Audit.
https://doi.org/10.1016/B978-1-84334-676-0.50005-4
Lansiluoto, A., Jokipii, A., & Eklund, T. (2016). Internal control effectiveness - a clustering
approach. Managerial Auditing Journal, 31(1), 5–34. https://doi.org/10.1108/MAJ-08-
2013-0910
Lin, Y. C., Wang, Y. C., Chiou, J. R., & Huang, H. W. (2014). CEO characteristics and internal
control quality. Corporate Governance (Oxford), 22(1), 24–42.
https://doi.org/10.1111/corg.12042
Singh, H., Woodliff, D., Sultana, N., & Newby, R. (2014). Additional evidence on the
relationship between an internal audit function and external audit fees in australia.
International Journal of Auditing, 18(1), 27–39. https://doi.org/10.1111/ijau.12009