Auditing
Relevant professional standards for this assignment may include:
AICPA ASB Standards:AU-C Section 240 “Consideration of Fraud in a Financial Statement Audit,”AU-C Section 315″Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement,”AU-C 330, “Performing Audit Procedures in Response to Assessed Risks and Evaluatingthe Audit Evidence.”
PCAOB Standards: AS8, “Audit Risk,” AS12, “Identifying and Assessing Risks of Material
Misstatement,” AS13, “The Auditor’s Responses to the Risks of Material Misstatement,” and AS14,“Evaluating Audit Results.”Interim AICPA Standards AU 316 and AU 317.
There are4 parts to this assignment.
1. (8 pts) Case 1.6 NextCard, Inc. (you read this case in Unit 1)
a. Discuss the fraud risk factors that were evident for the 2000 audit.
b. What could (should?) the auditors have done to address these fraud risk factors in the audit planning and implementation?
Be specific with respect to NextCard. (Refer to the above standards although not in effect at the time of this case).
2. (8 pts) Case 2.5Lipper Holdings, LLC
a. Using hindsight (which is 20/20, of course!), list and discusssome of the specific fraud factors at Lipper that should have served as red flags to the auditors, PwC.
b. What could (should?) the auditors have done to address these fraud risk factors in the audit planning and implementation?
Be specific with respect to Lipper. (Refer to the above standardsalthough not in effect at the time of this case).
3. (8 pts) Case 1.10 DHB Industries, Inc.(you read this case in Unit 1)
a. List and discuss some of the specific fraud factors at DHB that should have served as red flags to the auditors.
b. What could (should?) the auditors have done to address these fraud risk factors in the audit planning and implementation? Be specific with respect to DHB.Refer to the above standards.
4. (6 pts)
a. What responsibility does an auditor have to uncover fraud perpetrated by client management?
b. What responsibility does an auditor of a public company have if he/she discovers an illegal act by the client?
AU316 (SAS 99) Consideration of Fraud in a Financial Statement Audit (AICPA now redrafted as AU-C 240 for nonpublic companies)
AU 316 PCAOB
http://pcaobus.org/Standards/Auditing/Pages/AU316.aspx
AU-C 240 Appendices A, B, and C (from AICPA Online Library)
AU 317 (SAS 54) Illegal Acts by Clients (AICPA now redrafted as AU-C 250 for nonpublic companies)
AU 317 PCAOB http://pcaobus.org/Standards/Auditing/Pages/AU317.aspx
Summary of Differences Between Clarified SASs and Existing SASs
http://www.aicpa.org/interestareas/frc/auditattest/downloadabledocuments/clarity/clarity_sas_summary_of_differences.pdf
The Fraud-Resistant Organization: Tools, Traits, and Techniques to Deter and Detect Financial Reporting Fraud
http://www.thecaq.org/docs/anti-fraud-collaboration-report/the-fraud-resistant-organization.pdf?sfvrsn=2
PCAOB OBSERVATIONS ON AUDITORS’ IMPLEMENTATION OF PCAOB STANDARDS RELATING TO AUDITORS’ RESPONSIBILITIES WITH RESPECT TO FRAUD
PCAOB Auditing Standard No. 14, Evaluating Audit Results
Appendix C – Matters That Might Affect the Assessment of Fraud Risks
http://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_14_Appendix_C.aspx
STAFF AUDIT PRACTICE ALERT NO. 5: AUDITOR CONSIDERATIONS REGARDING SIGNIFICANT UNUSUAL TRANSACTIONS
http://pcaobus.org/Standards/QandA/04-07-2010_APA_5.pdf
Managing fraud risk: The audit committee perspective
Association of Certified Fraud Examiners
Some interesting videos related to fraud:
Watch the Joseph T. Wells video about deterring fraud
What CPAs need to know about organized crime – video with retired FBI agent
http://bcove.me/ag3f5anc
Here are some interesting articles about fraud. Take the Fraud IQ tests and see how you perform.
Pay attention to nonfinancial measures when performing audits If you’re only looking at the money, you may be missing red flags for fraud.
http://www.journalofaccountancy.com/newsletters/2015/sep/nonfinancial-measures-when-performing-audits.html
What’s your fraud IQ?
http://www.journalofaccountancy.com/issues/2015/aug/what-is-your-fraud-iq.html
What’s your fraud IQ?
http://www.journalofaccountancy.com/issues/2015/apr/fraud-iq-quiz.html
Fraud – SEC Enforcement Actions
http://www.journalofaccountancy.com/issues/2015/jan/fraud.html
Board members keenly focused on risk
http://www.journalofaccountancy.com/News/201411058
SEC expects to pay whistleblower a record $30 million
http://www.journalofaccountancy.com/News/201410983
Lessons from an $8 million fraud
What the criminal was thinking and what can be done to prevent or uncover similar crimes
http://www.journalofaccountancy.com/Issues/2014/Aug/fraud-20149862
Accounting Fraud on the Rise at U.S. Companies
http://www.accountingtoday.com/news/Accounting-Fraud-Rise-US-Companies-69646-1.html
What’s your fraud IQ?
http://www.journalofaccountancy.com/Issues/2014/Oct/fraud-quiz
What’s your fraud IQ?
http://www.journalofaccountancy.com/Issues/2014/Aug/fraud-IQ-20149743
What’s your fraud IQ?
CPAs need the ability to ask the right questions and gather crucial information from conversations. Are your interviewing skills up to par?
http://www.journalofaccountancy.com/Issues/2014/Jun/20149666
What’s your fraud IQ?
http://www.journalofaccountancy.com/Issues/2014/Mar/20139008
Biennial report details fraud’s impact worldwide
http://www.journalofaccountancy.com/News/201410170
Failure to detect theft and fraud: It’s not just an audit issue
http://www.journalofaccountancy.com/Issues/2014/Feb/20139031
What accounting fraud risk factors will attract SEC’s attention?
http://www.journalofaccountancy.com/News/20139258
Fraud hotlines: Don’t miss that call
( http://www.journalofaccountancy.com/Issues/2013/Aug/20127043 )
Fraud in financial reporting, auditing among targets of new SEC initiatives
( http://www.journalofaccountancy.com/News/20138272 )
Criminal minds
What CPAs can learn from the way thieves think
http://www.journalofaccountancy.com/Issues/2012/Aug/20125839
Small business, big risk
Fraud controls lacking at organizations with fewer than 100 employees.
http://www.journalofaccountancy.com/Issues/2012/Aug/20125707
To prevent fraud, offer a hotline, train employees on fraud prevention, report says
http://journalofaccountancy.com/News/20125666
What CPAs need to know about organized crime
http://journalofaccountancy.com/Issues/2012/Apr/20114853