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In: Accounting

1. Create a scenario in which a company conceals financial fraud from the auditing firm through...

1. Create a scenario in which a company conceals financial fraud from the auditing firm through the use of information technology. Next, suggest at least one (1) way in which an auditing firm can minimize its exposure to this risk.

2. Select a balance sheet account or income statement account, and discuss the type of audit procedure that would produce the most reliable evidence for that account balance.

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Expert Solution

If the Company is making use of Tally or SAP or any type of ERP to maintain the transactions and activities: there are many probabilities of fraud to be in the financial statements. The actual invoice bill will be misrepresented in the accounting software. The asset value might be hiked to show off the better financial position. Nowadays: everything is in online transactions and no actual invoice is being written. Even while auditing- it would be very, challenging to cross check and verify the supporting documents.

Ways to minimise the risk: Auditing in ERP environment is a challenging task as there are many possible likelihoods to alter the financial information presented. One way is that computed assisted audit techniques will be helpful in minimising the list of potential frauds. There exists various: audit parameters that would help in assessing the effectiveness of internal control and reliability of financial data.

ekkarill92 answered 2 years ago
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