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    F A (Part1)

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    Mohamed Diab
    The fraud triangle identifies three conditions that generally exist for fraud to occur: 1. Pressure/incentive: A perceived pressure or incentive, whether financial need or ambition. For example, an employee experiencing financial difficulties may be motivated to commit fraud. 2. Opportunity: Circumstances that present an opportunity to commit fraud. For example, a lack of internal controls that allow for improper activities to go undetected. 3. Rationalization: Individuals rationalize their actions as not actually being wrong. For example, telling themselves they are just "borrowing" money and will pay it back. When all three elements of the fraud triangle exist, the risk of fraud increases. Auditors should consider risk factors that could

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    F A (Part1)

    Uploaded by

    Mohamed Diab
    20 views14 pages
    The fraud triangle identifies three conditions that generally exist for fraud to occur: 1. Pressure/incentive: A perceived pressure or incentive, whether financial need or ambition. For example, an employee experiencing financial difficulties may be motivated to commit fraud. 2. Opportunity: Circumstances that present an opportunity to commit fraud. For example, a lack of internal controls that allow for improper activities to go undetected. 3. Rationalization: Individuals rationalize their actions as not actually being wrong. For example, telling themselves they are just "borrowing" money and will pay it back. When all three elements of the fraud triangle exist, the risk of fraud increases. Auditors should consider risk factors that could

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    auditing

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    F.A(Part1)

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    The fraud triangle identifies three conditions that generally exist for fraud to occur: 1. Pressure/incentive: A perceived pressure or incentive, whether financial need or ambition. For example, an employee experiencing financial difficulties may be motivated to commit fraud. 2. Opportunity: Circumstances that present an opportunity to commit fraud. For example, a lack of internal controls that allow for improper activities to go undetected. 3. Rationalization: Individuals rationalize their actions as not actually being wrong. For example, telling themselves they are just "borrowing" money and will pay it back. When all three elements of the fraud triangle exist, the risk of fraud increases. Auditors should consider risk factors that could

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    20 views14 pages

    F A (Part1)

    Uploaded by

    Mohamed Diab
    The fraud triangle identifies three conditions that generally exist for fraud to occur: 1. Pressure/incentive: A perceived pressure or incentive, whether financial need or ambition. For example, an employee experiencing financial difficulties may be motivated to commit fraud. 2. Opportunity: Circumstances that present an opportunity to commit fraud. For example, a lack of internal controls that allow for improper activities to go undetected. 3. Rationalization: Individuals rationalize their actions as not actually being wrong. For example, telling themselves they are just "borrowing" money and will pay it back. When all three elements of the fraud triangle exist, the risk of fraud increases. Auditors should consider risk factors that could

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    Download as pdf or txt
    of 14

    Advanced

    Auditing
    Chapter (1)
    Fraud Auditing
     Learning Goals:

    1. Define fraud and distinguish between fraudulent financial reporting


    and misappropriation of assets.

    2. Describe the fraud triangle and identify conditions for fraud.

    3. Understand the auditor’s responsibility for assessing the risk of


    fraud and detecting material misstatements due to fraud.

    4. Identify corporate governance and other control environment


    factors that reduce fraud risks.
     Learning Goals:

    5. Develop responses to identified fraud risks.

    6. Recognize specific fraud risk areas and develop procedures to


    detect fraud.

    7. Understand interview techniques and other activities after fraud is


    suspected.
    Error Vs. Fraud
     What is the difference between “Fraud and Error” ?

     Error : Is un-intentional action.

     Fraud: Is intentional act by one or more (collusion)


    Define fraud and distinguish between fraudulent
    financial reporting and misappropriation of assets
     Types of Fraud:

     A) Fraudulent Financial Reporting )‫ (كدب‬.

     B) Misappropriation Of Assets )‫ (سرقة‬.


    Define fraud and distinguish between fraudulent
    financial reporting and misappropriation of assets
     A) Fraudulent Financial Reporting )‫ (كدب‬.
    • Is an Intentional Misstatement or Omission of Amounts or Disclosures
    with the Intent To Deceive Users.

     Most cases involve an attempt to overstate income, but can also


    understate income. Company may use the following:
    1. “Cookie Jar Reserves” that may be used to increase earnings in the future periods,
    Income Smoothing is a form of earnings management in which revenues and
    expenses are shifted between periods to Reduce Fluctuations in earnings.

    2. Earnings management involves deliberate actions taken by management to meet


    earnings objectives.
    Define fraud and distinguish between fraudulent
    financial reporting and misappropriation of assets
     A) Fraudulent Financial Reporting )‫ (كدب‬.

    Cookie Jar Reserves


    Define fraud and distinguish between fraudulent
    financial reporting and misappropriation of assets
     B) Misappropriation Of Assets (‫)سرقة‬.
     The term misappropriation of assets is normally used to refer to theft
    involving employees and others internal to the organization.

     Example: CEO of Tyco stole $100 million.

     Is The fraud that mounts involved are Not material to the financial
    statements. However, the theft of company assets is often a
    management concern.

     Misappropriation Of Assets (most of cases) are done by a lower level


    employees.
    Describe the fraud triangle and identify conditions for
    fraud.
     Conditions for fraud

    Donald Cressey`s Fraud Tringle


    Describe the fraud triangle and identify conditions for
    fraud.
     Fraud Tringle
    Describe the fraud triangle and identify conditions for
    fraud.
     Examples of Risk Factors for Fraudulent Reporting
    Describe the fraud triangle and identify conditions for
    fraud.
     Examples of Risk Factors for Misappropriation of
    Assets
    Describe the fraud triangle and identify conditions for
    fraud.
     Why Fraud Occurs ?

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