POST MID ASSIGNMENT

KINNAIRD COLLEGE FOR WOMEN, LAHORE

SUBMITTED TO: Ma’am Atia Alam

SUBMITTED BY: Surriya Murtaza
Date of submission: 7th December 21
Course: Auditing
Semester: 7th
Major: Bs. Accounting and Finance
Q1: Required:
Identify and explain controls Tinkerbell should implement to reduce the risk of fraud
occurring
again and, for each control, describe how it would mitigate the risk.
TEST OF CONTROL OBJECCTIVE
Enter an order for a fake consumer account To make sure that orders are only accepted
number and confirm the system doesn’t accept for valid consumers.
it.
Examine a sample of managed credit To confirm that goods are only delivered to
applications from the credit agency and follow consumers with worthy credit ratings.
through the credit limit approved to the sales
system.
Acquire a copy of current price list and agree To confirm that goods are only sold at
for a sample of invoices that current prices have official prices.
been used.
Approves discounts applied to invoices agree to To confirm that sales discounts are only
the consumers masters file. delivered to valid customers.
Inspect a sample of orders to confirm that an To ensure that all orders are recorded
order acceptance letter has been granted. correctly.
Review the last system produced sequence To ensure completeness of income for
check of sales invoices to identify any goods shipped.
omissions.

Question 3
You are the audit manager in a firm of chartered accountants. During the audit of a client for the
year ended 31 December 2019, the audit team has prepared the following schedule to Summarize
the responses from three debtors:

Debtor-a:
Assessment:
Despite the fact that the equilibrium affirmed is something similar, it raises question for the
dependability of the reaction since the affirmation was not gotten straightforwardly from the
affirming party.
Steps to perform
 Auditors ought to adjust or add strategies to determine questions over the unwavering
quality of data to be utilized as review proof.
  Auditors should contact the affirming party and solicitation them to react
straightforwardly to the auditors.

Debtor-b:
ASSESSMENT:
Apparently the affirmation didn't come from the initially planned affirming party. It conveys
hazard of interference, change or misrepresentation.
 Reviewer ought to resend the affirmation again to the borrower.
 Inspector should change the danger of material error at the affirmation even out and
adjust arranged review systems in like manner.
 Assuming it is learned that misrepresentation exist, it is significant that the matter is
brought to the suitable degree of the executives and those accused of administration.
 Assuming the inspector has questions about the uprightness of the administration or those
accused of administration, than the evaluator ought to consider to get lawful guidance for
fitting course of activity.

Debtor-c:
ASSESSMENT:
Deals return resulting to the year-end can be a changing occasion which should be changed in the
fiscal reports.
 Check the arrival of products with the applicable merchandise receipt report.
 Ask from the administration the explanations behind the arrival of good and survey
whether it is a changing occasion.
 Assuming it is set up that it is a changing occasion than request that the customer
diminish the deals and receivables and join comparing impacts in cost of deals and stock.
 Consider the misrepresentation hazard that whether the deals were made for exaggerating
the deals for the year end.
Question 2:

1. State the external auditor’s responsibilities regarding the detection of fraud

2. Discuss to which groups the auditors of Tye Co could report the ‘fictitious’ aviation fuel
inventory
The external auditor is basically answerable for the audit opinion on the financial statement
observing the worldwide examining guidelines (ISAs). ISA 240 the auditor’s obligations
identifying with misrepresentation in a review of budget reports is applicable to review work in
regards to extortion. The primary focal point of review wok is consequently to guarantee that the
financial statements shows a valid and reasonable view. The identification of fraud is in this
manner not the fundamental focal point of the outside reviewers work. An auditors is answerable
for getting sensible confirmation that the budget reports in general are free structure material
misquote, regardless of whether brought about by fraud or blunder. The auditors is answerable
for keeping a demeanor of expert incredulity all through the review, considering the potential for
the board abrogate of controls and perceiving the way that review methods that are compelling
for distinguishing blunder may not be viable for detecting fraud.
Materiality:
ISA 240 states that auditors ought to decrease review hazard to an acceptably low level.
Accordingly, in arriving at the review assessment and performing audit work, the outside
reviewer considers the idea of materiality. As such, the external auditor’s isn't liable for really
looking at all the exchange. Review systems are wanted to have a sensible probability of
distinguishing material fraud
Discussion between audit team:
A conversation is needed among the commitment group putting specific accentuation on how
and where the entity’s financial statements might be vulnerable to material error due to fraud,
including how misrepresentation may happen.
Frauds’ identification:
In circumstances where the external auditor distinguishes fraud, then, at that point, the auditor
should think about the ramifications for the whole review. At the end of the day, the outside
examiner has an obligation to expand testing into different regions on the grounds that the danger
of giving an erroneous audit opinion will have expanded
REPORT FRAUDS TO:
1- Repot to audit commitee:
Reveal the circumstance to the audit committee as they are accused of keeping a high standard of
governance in the organization. The council ought to have the option to examine the
circumstance with the chiefs and suggest that they make a proper move for example correct the
financial statements.
2- Repot to government:
As Tye Co is acting under an administration contract, and the over-proclamation of stock will
mean Tye Co penetrates that agreement (the announced benefit turning into a misfortune), then,
at that point, the evaluator might need to report the circumstance straightforwardly to the public
authority. The auditor of Tye Co necessities to survey the agreement to affirm the announcing
needed under that agreement.
3- Repot to members:
Assuming that the financial statements don't show a valid and reasonable view then the evaluator
needs to report this reality to the individuals from Tye Co. The review report will be qualified
with an aside from or unfavorable assessment (contingent upon materiality) and data concerning
the justification behind the conflict given. For this situation the auditor is probably going to state
really the issue of stock amounts being mistaken, rather than expressing or inferring that the
chiefs are engaged with fraud.
4- Report to proficient body
On the off chance that the auditor is dubious with respect to the right game-plan, counsel might
be acquired from the inspector's expert body. Contingent upon the guidance got, the auditor may
essentially answer to the individuals in the review report, in spite of the fact that resignation and
the gathering of a comprehensive gathering is another reporting option.