1. WHAT ARE THE BASIC PRINCIPLES OF RISK MANAGEMENT?

According to ISO 31000, there are around 11 risk management principles which

refer to the fundamental idea, rule, or fact about a focus. ISO 31000 risk principles

serve as the standard, process, reason, plan, and execution ofthe risk management

framework and its processes. ISO 31000 is appropriate to all organizations and

may be utilized with any product or service. The basic principles, DIRECTLY

according to the standard, are enumerated below:

• Risk management is tailored;

• Risk management is dynamic, iterative, and responsive to change;

• Risk management is an integral part of all organizational processes;

• Risk management is part of decision making;

• Risk management facilitates continual improvement of the

. Moreover, it is an

environment where people are committed to following an organization’s policies

and procedures, and its ethical and behavioral standards. Additionally, a control

environment incorporates technical aptitude and ethical commitment.

3. DISTINGUIS BETWEEN THE TERMS ERROR AND FRAUD.

The distinctive characteristics that differentiate fraud and error lies on the

circumstances whether the underlying situation that leads to the inputting

untruthful information in the financial statements is planned (intentional) or

unintentional. AS contrasted to error, fraud is intentional and typically includes

deliberate concealment of the facts. Error refers to an unintentional misstatement

in the financial statements, including the omission of an amount or disclosure.

4. DESCRIBE HOW EACH ELEMENTS OF FRAUD TRIANGLE IS NECESSARY FOR

FRAUD TO OCCUR.

• Incentives – The bigger the incentive, the greater the chance an

individual will be able to rationalize the acceptability of committing

fraud.

• Opportunities –the absence of control or the ability of management to

override controls provide an opportunity for a fraud to be perpetrated.

• Rationalization – individuals may be able to rationalize committing

fraudulent act. Some individuals possess an attitude, character or set of

ethical values that allow them knowingly and intentionally to commit a

dishonest act.

In accordance to the Fraud Triangle Theory, all the three (3) elements must coexist

for fraud to occur. Incentive becomes the motive of the committer.

Opportunities are necessary to commit fraud as it is the incident where

committers take advantage of anything weak in the control of the business. And

finally, rationalization serves as the mind-set that the fraud that will be done

would be justified. This mind-set would be the fraudster stand and justification to

his/her acts. All these three has different roles in motivating the perpetrator to

commit fraud and that made them equally important in the situation.

5. DEFINE AND ILLUSTRATE KITING. WHAT CONTROLS SHOULD THE CLIENT

INSTITUTE TO PREVENT IT?

Kiting occurs by overstating the cash balance by the use of checks floats. It is done

by making transfers near year-end from one bank account to another bank

account, recording the deposit in the second account but not recording the

disbursement on the first division’s accou

Bal. P15M

is still

P10M. So, the total cash balance is still P10M at BDO

and P20M at PNB, which has a total of P30M.