Fraud
Risk Assessment Audit Procedures
The auditor will perform
the following audit procedure for risk assessment of fraud.
1. Risk Assessment of Management
The
auditor will inquire from the management about their risk assessment of fraud
and effective control for prevention of misstatements, because the fraud
prevention is primary responsibility of the management. If management has not
made any risk assessment, this is an indication that poor control may in the
organization due to lack of interest on management in risk assessment.
2. Inquiry from Management About Fraud
Management
can provide a detail information about the possibility of risk due to the fraud
, especially expected fraud where employee are involved, however, management
inquiry does not provide information about management frauds.
3. Inquiry from Employee & Others
Auditor
can get information from the employees, internal auditor, legal counsel and
others about the possibilities of misstatement due to fraud.
4. Inquiry from those responsible for
Governance
Governance
is responsible for monitoring and overseeing the performance of management and
therefore auditor can get useful information about the competency and integrity
of the management by making the inquiry from those who are responsible for
Governance. It would also help auditor to understand the role and extent of
governance activities.
5. Other information
Other
information may also provide auditor useful information about the risk of
material misstatement due to fraud. These other information includes client
retention documentation, experience with the client, other engagement performed
for client.
6. Existence of Risk Factors
There may be incentive or pressure to commit the fraud,
this incentive or pressure is known as Risk factor for fraud. Example of risk
factor include , bank requirement for financing, salary increment based on the
financial performance etc.
