Auditor Responsibility

AAA – L3 – SA – Q3.3 – Suspected Fraud

First step when suspecting fraud by senior management.

Question

When an auditor suspects that fraud has occurred in a corporate client’s business, and that senior management are involved in the fraud, the auditor should as a first step:

A discuss the matter with the audit committee

B seek legal advice

C ask a professional accountancy body for advice

D report the matter to the police authorities.

Answer

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Tags: Auditor Responsibility, Confidentiality, Fraud, ICAG
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – SA – Q2.8 – Subsequent Events

Auditor’s responsibility for subsequent events.

Question

Before the issue of the auditor’s report, what is the responsibility of the auditor with regard to significant events after the date of the financial statements?

A The auditor must actively look for significant subsequent events.

B The auditor should consider subsequent events only if they come to his attention.

C The auditor should consider only those subsequent events brought to his attention by the client’s management.

D The auditor must actively look for significant adjusting subsequent events but should consider subsequent non-adjusting events only if they come to his attention.

Answer

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Tags: Auditor Responsibility, Financial Statements, ICAG, Subsequent events
Level: Level 3

Topic: Evaluation and review

AAA – L3 – Q13 – Fraud

Comment on the need for ethical guidance for accountants on money laundering.

Question

(a) Comment on the need for ethical guidance for accountants on money laundering. (b) Explain the difference between fraud and error and how the issues shown here could be categorised as fraud or error. (c) Discuss the role of management and the role of the auditor in the prevention and detection of fraud and error.

Daniel’s Maritime and Harbor (DMH) have a marina in Lagos and a large sales operation dealing in yachts and speedboats. You are responsible for the audit of DMH and have found some potential causes of concern that could indicate fraudulent activity or financial misconduct within the company. In particular:

30% of the yachts on sale by DMH are supplied through one of the major international boating companies with a special finance arrangement deal. However, DMH have also obtained separate finance on these yachts, which are therefore in effect being ‘double financed’.
Ten yachts shown as assets by DMH cannot be located, with no explanation other than that they have not been sold. These yachts together are worth approximately ₦50 million.
Long delays have occurred in performing reconciliations with the last four months of reconciliations still not completed. At the time of the last reconciliation, material differences had been identified upon which no action appears to have been undertaken.
Revenues have been overstated by ₦100 million in the current financial statements.
The finance director has been off sick with stress for the last five months and therefore has not been available to discuss any of the issues identified.

(d) Describe what steps you would take to further investigate and then report on the matters referred to above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Responsibility, Ethics, Fraud, Money laundering
Level: Level 3

Topic: Fraud and Error

Tag (SQ): Auditor Responsibility

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AAA – L3 – SA – Q3.3 – Suspected Fraud

First step when suspecting fraud by senior management.

AAA – L3 – SA – Q2.8 – Subsequent Events

Auditor’s responsibility for subsequent events.

AAA – L3 – Q13 – Fraud

Comment on the need for ethical guidance for accountants on money laundering.

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AAA – L3 – SA – Q3.3 – Suspected Fraud

First step when suspecting fraud by senior management.

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AAA – L3 – SA – Q2.8 – Subsequent Events

Auditor’s responsibility for subsequent events.

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AAA – L3 – Q13 – Fraud

Comment on the need for ethical guidance for accountants on money laundering.

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