Question

The Internet is a great place to find additional information about financial statement fraud. Using your favorite Internet search engine, try various word combinations to see what you can find about financial statement fraud. For example, type in the search window "financial statement fraud" and check out some of the results.

1)Name and provide the web address of one article.

2) Give 2 reasons why the article is interesting.  

Next, go to the following Web address: www.cfo.com/article.cfm/14490470. Here you will find an article from CFO magazine about the auditor's role in detecting financial statement fraud.

3) What are some of the key points of the article?

4) What did you learn after reading this article?

Answer 1

1.https://brisbaneacfe.org/library/third-party-fraud/common-financial-statement-frauds/

2.This article clearly explains the basic meaning of what a financial statement fraud is all about and also provide

valuable information regarding the common financial statement frauds that are employed.

The article explains how various frauds are conducted and also how they effect various stakeholders.The concepts were explained in a simple and entertaining manner and even a layman can easily understand these.

3.Keypoints of the article :

a. The discrepancy between what an auditor does and what an investor expect is known as an Expectation gap.

b.While conducting an audit an auditor does not generally examine eacha nd every transaction and event and there is no gurantee that all material misstatements,whether caused by error or fraud,will be detected.

c. Audit report should explain the auditors' role and their limitations in finding fraud.

d. Auditors responsibility is to provide “reasonable assurance” that the financial statements they’ve reviewed “are free of material misstatement whether caused by error or fraud.

e. Audit reports reports do not adequately reflect the amount of audit work and judgment involved in forming audit opinions.

f. PCAOB is working on establishing a financial-reporting fraud center for collecting information on preventing and detecting fraud.

4.Learning after reading the article:

Primarily it is the responsibility of the management of the company to prevent and detect fraud from occuring.An auditor is regarded as a watchdog but not a blood hound while verifying the records and transactions of a company.The primary responsibilty of a auditor is to express an opinion whether the finnacial statements reviewed were free from material misstatements whether caused by fraud or error.

Due to various inherent limitations owing to an audit it is higly impossible to verify each and every transcation and to detect every fraud that occurs in a company.But it is the responsibility of the auditor to see that his work is conducted in a systematic manner and as per auditing standards laid down by the Board.

Generally audit report lays down the general scope of the auditors work and also show the procedures followed in reaching conclusions while expressing audit opinions.PCAOB should take care in this aspect such that the users of the audir report clearly understand the work of the auditor and the manner in which it is done.

From the article it is evident that PCAOB’s advisory group — which also includes finance executives, accounting-firm representatives, and accounting professors — generally refrained from recommending that audit reports move in a more detailed direction. The group cited the complexity of amending existing auditing standards, the possibility of increased liability, and the uncertainty over whether doing so would provide true value to investors.