Question
In: Accounting
1. You have an audit client that you have been working on for several years. You...
1. You have an audit client that you have been working
on for several years. You discover a fraud scheme that has been
going on for several years while you were the auditor that you
missed in prior audits. What should you do when you discover the
fraud?
2. What are some things you should avoid when you
discover the fraud?
Solutions
Expert Solution
1. Once Fraud Scheme is detected, which was missed out in prior years, The Auditor will follow the following steps
- Priortise the Fraud scheme with the Risk
- Check the impact of Fraud scheme potential with the control Gap
- Test the effectiveness ofDetective // Preventive Control
- Documentation of such Fraud scheme assemssment and reported to the Management and Board.
with this assessment Auditor will determine the schem left unidentified in prior period against the control in place, whether such scheme has any impact in prior period or not, if yes, same is notified to the management along with possible impact and chances of its liklihood of its occurence.
2. After discovering the fraud following things should be avoided are as follows:
- Not to indulge on OWN in th eprocess of interrogation and interviewing unless specifically stated by the management
- If once permitted for interogation it is advisable to accompy one more person during the time of interrogation and interviewing
- In case of Legal hazards it is advisable to take legal counsel advise
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