Forensic Audit – Knowsia

AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

Question

Judi Nigeria Limited is a company that manufactures bicycles. The company acquired M&M Tires Limited, a manufacturer of tyres, in the 2018 financial year. Six months after the acquisition, M&M Tires declared bankruptcy.

The management of Judi Nigeria alleged that there had been financial impropriety by the previous management of M&M and that the 2017 financial statements of the company did not show a true and fair view of its financial performance. The management of Judi Nigeria Limited also alleged that the auditors of M&M had been negligent in carrying out the audit.

The Managing Director has asked your audit firm to carry out a forensic audit to determine if the auditors were negligent in their duties.

Required:

(a) Distinguish among forensic accounting, forensic investigation, and forensic audit. (6 Marks)
(b) Identify the various government agencies associated with forensic auditing. (4 Marks)
(c) Apply the fundamental ethical principles to the forensic auditor’s engagement. (5 Marks)
(d) Describe the procedures to be adopted by an auditor in a forensic audit. (5 Marks)

Answer

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Tags: Ethical Principles, Forensic Accounting, Forensic Audit, Forensic Investigation, Forensic Procedures
Level: Level 3

Topic: Forensic Auditing

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

Question

At the annual general meeting of Aggressive Bank Limited for the year 2020, shareholders raised concerns over increasing cases of customer complaints about fraud. Shareholders emphasized that drastic actions were required to avoid brand damage and reputational issues.

In performing their oversight functions, the audit committee commissioned the internal audit unit to investigate fraud issues and likely causes. The internal audit report highlighted the following issues:

Hacking of Accounts: Unauthorized transfers due to poor information security systems.
Forgery: Forged cheques, signatures, and withdrawal slips used in collusion with bank staff.
Fictitious Accounts: Opening and operating fake accounts to facilitate illegal transfers due to incomplete KYC.
Loans to Fictitious Borrowers: Fictitious loans issued via fake accounts.
False Overtime Claims: Junior staff claiming overtime for hours not worked.
Suppression of Cash/Cheques: Diversion of customer deposits and loan repayments into fictitious accounts.
Alteration of Programs: Unauthorized access to systems to manipulate account balances.

Likely Causes:

Weak internal controls and supervision.
Non-compliance with KYC rules.
Poor IT and database management.
Negligence, inadequate training, and poor working conditions.
Fear of reporting fraud to regulators due to reputational concerns.

The audit committee mandated management to engage a forensic expert to investigate and report on the matter within four weeks. Your firm has been appointed for this engagement.

Required:

(a) Discuss the ethical principles applicable to this situation. (5 Marks)

(b) Advise on the procedures to gather evidence for an acceptable report to management. (5 Marks)

(c) Recommend the agencies and relevant laws management should use to tackle these problems, where legal actions might be required. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Ethical Principles, Evidence Gathering, Forensic Audit, Fraud investigation, Regulatory Compliance
Level: Level 3

Topic: Forensic Auditing

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

Question

In accordance with ISA 240, the primary responsibility for the prevention and detection of fraud rests with Management. But the issue of Accountants seeking specialization as forensic auditors has continued to dominate discussion on professional practice.

Required:
a. Explain forensic audit and how it applies to fraud investigation. (5 Marks)

b. Compare the responsibilities of the auditor in respect of fraud when conducting:
i. Statutory Audit (5 Marks)
ii. Forensic Audit (5 Marks)
(Total 15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Responsibilities, Forensic Audit, Fraud Detection, Professional Practice, Statutory Audit
Level: Level 3

Topic: Forensic Auditing
Series: NOV 2012

AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

Question

The Managing Director has asked your audit firm to carry out a forensic audit to determine if the auditors were negligent in their duties.

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Ethical Principles, Forensic Accounting, Forensic Audit, Forensic Investigation, Forensic Procedures
Level: Level 3

Topic: Forensic Auditing

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

Question

Hacking of Accounts: Unauthorized transfers due to poor information security systems.
Forgery: Forged cheques, signatures, and withdrawal slips used in collusion with bank staff.
Fictitious Accounts: Opening and operating fake accounts to facilitate illegal transfers due to incomplete KYC.
Loans to Fictitious Borrowers: Fictitious loans issued via fake accounts.
False Overtime Claims: Junior staff claiming overtime for hours not worked.
Suppression of Cash/Cheques: Diversion of customer deposits and loan repayments into fictitious accounts.
Alteration of Programs: Unauthorized access to systems to manipulate account balances.

Likely Causes:

Weak internal controls and supervision.
Non-compliance with KYC rules.
Poor IT and database management.
Negligence, inadequate training, and poor working conditions.
Fear of reporting fraud to regulators due to reputational concerns.

The audit committee mandated management to engage a forensic expert to investigate and report on the matter within four weeks. Your firm has been appointed for this engagement.

Required:

(a) Discuss the ethical principles applicable to this situation. (5 Marks)

(b) Advise on the procedures to gather evidence for an acceptable report to management. (5 Marks)

(c) Recommend the agencies and relevant laws management should use to tackle these problems, where legal actions might be required. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Ethical Principles, Evidence Gathering, Forensic Audit, Fraud investigation, Regulatory Compliance
Level: Level 3

Topic: Forensic Auditing

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

Question

Required:
a. Explain forensic audit and how it applies to fraud investigation. (5 Marks)

b. Compare the responsibilities of the auditor in respect of fraud when conducting:
i. Statutory Audit (5 Marks)
ii. Forensic Audit (5 Marks)
(Total 15 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Responsibilities, Forensic Audit, Fraud Detection, Professional Practice, Statutory Audit
Level: Level 3

Topic: Forensic Auditing
Series: NOV 2012

Question Tag: Forensic Audit

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AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

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Question Tag: Forensic Audit

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AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

You're reporting an error for "AAA – May 2021 – L3 – Q5 – Forensic Auditing"

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

You're reporting an error for "AAA – May 2023 – L3 – Q7 – Forensic Auditing"

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

You're reporting an error for "AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing"

AAA – May 2021 – L3 – Q5 – Forensic Auditing

Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.

You're reporting an error for "AAA – May 2021 – L3 – Q5 – Forensic Auditing"

AAA – May 2023 – L3 – Q7 – Forensic Auditing

Discuss ethical principles for fraud investigation, advise on evidence gathering procedures, and recommend laws and agencies for legal action.

You're reporting an error for "AAA – May 2023 – L3 – Q7 – Forensic Auditing"

AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing

This question explores forensic audit, its application in fraud investigation, and compares auditor responsibilities in statutory versus forensic audits.

You're reporting an error for "AAA – Nov 2012 – L3 – SB – Q4 – Forensic Auditing"

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