CUC Cendant Corporation: Fraudulent Financial Reporting
1) Explain the auditor’s responsibility to detect material misstatements due to errors and fraud and the categories of fraud affecting financial reporting.
Identify misstatement in financial report is the major task of auditor. Regardless the result of error or fraud, plan and perform audit engagements are being required by auditors to ensure financial statements are free from material misstatement by reasonable assurance instead of total responsibilities to the fair and true reports due to the limitation of auditing. When there is a high likelihood of fraud through evaluating by auditors, audit tests are needed to be expanded. (Moroney, Campbell & Hamilton, 2011) Fraudulent of financial reporting or misappropriation of assets will arise fraud misstatement where fraudulent shown in the financial statement misstatements or omissions that deceive users and for misappropriation of assets is referring to the thefts of entity assets reported in financial statement. (Kimmel, Carlon, Loftus, Mladenovic, Kieso & Weygandt, 2006).
2) Explain the THREE (3) broad conditions that normally exist when fraud is present?
Fraud inclusive assets misappropriation and fraudulent financial reporting is present with three conditions. First, the management may be pressurized or encouraged to commit fraudulent financial reporting within or beyond the entity in order to match the expected earnings target. (Moroney, R., Campell, F., & Hamilton, J. 2011). Second, a perceived opportunity to commit fraud may exist when an individual believes internal control can be overridden. This can be shown if an individual is in a position of trust or has knowledge of specific deficiencies in internal control. (Moroney, R., Campell, F., & Hamilton, J. 2011). Third, attitudes and rationalization contribute to commitment of a fraudulent act by individuals. Some individuals have a set of ethical values, an attitude or characters that allow them to commit fraudulent act knowingly and intentionally.
Identify misstatement in financial report is the major task of auditor. Regardless the result of error or fraud, plan and perform audit engagements are being required by auditors to ensure financial statements are free from material misstatement by reasonable assurance instead of total responsibilities to the fair and true reports due to the limitation of auditing. When there is a high likelihood of fraud through evaluating by auditors, audit tests are needed to be expanded. (Moroney, Campbell & Hamilton, 2011) Fraudulent of financial reporting or misappropriation of assets will arise fraud misstatement where fraudulent shown in the financial statement misstatements or omissions that deceive users and for misappropriation of assets is referring to the thefts of entity assets reported in financial statement. (Kimmel, Carlon, Loftus, Mladenovic, Kieso & Weygandt, 2006).
2) Explain the THREE (3) broad conditions that normally exist when fraud is present?
Fraud inclusive assets misappropriation and fraudulent financial reporting is present with three conditions. First, the management may be pressurized or encouraged to commit fraudulent financial reporting within or beyond the entity in order to match the expected earnings target. (Moroney, R., Campell, F., & Hamilton, J. 2011). Second, a perceived opportunity to commit fraud may exist when an individual believes internal control can be overridden. This can be shown if an individual is in a position of trust or has knowledge of specific deficiencies in internal control. (Moroney, R., Campell, F., & Hamilton, J. 2011). Third, attitudes and rationalization contribute to commitment of a fraudulent act by individuals. Some individuals have a set of ethical values, an attitude or characters that allow them to commit fraudulent act knowingly and intentionally.