- 20 Marks
AA – L2 – Q5 – Fraud and Error
Explain how internal audit helps manage fraud and error risks in an entity.
Question
(a) Explain how the internal audit function helps an entity with the risk of fraud and error.
(b) Explain the responsibilities of external auditors in respect of the risk of fraud and error in an audit of financial statements.
(c) SunCity Travel is an independent travel agency. It does not operate holidays itself. It takes commission on holidays sold to customers through its chain of high street shops. Staff are partly paid on a commission basis. Well established tour operators run the holidays that SunCity Travel sells. The networked reservations system through which holidays are booked and the computerised accounting system are both well-established systems used by many independent travel agencies.
Payments by customers, including deposits, are accepted in cash and by debit and credit card. SunCity Travel is legally required to pay an amount of money (based on its total revenue for the year) into a central fund maintained to compensate customers if the agency should cease operations.
Describe the nature of the risks to which SunCity Travel is subject arising from fraud and error.
Find Related Questions by Tags, levels, etc.
- Tags: Corporate Governance, Error Risk, Fraud Risk, Internal Audit
- Level: Level 2
- Topic: Fraud and Error
