- 10 Marks
AA – May 2019 – L2 – Q1a – Responsibilities for the prevention and detection of fraud
Explains auditor’s responsibility regarding fraud detection and outlines audit procedures to detect fraud anomalies.
Question
a) J.K. Asenso is a member of a team auditing the financial statement of Sascraku Co. Ltd for the year ended 31 December 2017. Shortly after the end of the audit, the media made an allegation of fraudulent activities with the aim of reducing tax liability against the company. A committee was appointed by Ghana Revenue Authority (GRA) to examine the books of the company to substantiate the allegations.
The committee discovered the following anomalies:
- Diverting receipts to private bank accounts;
- Stealing physical assets or intellectual property;
- The entity paid for goods that had not been received;
- Assets had been used for personal purposes.
The directors were not happy with the work of the auditors due to their inability to discover the above anomalies.
Required:
i) Explain the responsibility of the Auditor with respect to detection and prevention of fraud.
(5 marks)
ii) Outline the audit procedures that the auditors should have adopted to detect the above anomalies.
(5 marks)
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