Peregrine Fraud Case Summary

1. Identify the fraud risk factors at Peregrine, especially control environment factors and the tone at the top, using the fraud triangle.
The fraud risk factors could be identified as incentives/pressures, opportunities, and attitudes/rationalization in fraud triangle. According to the case, Peregrine’ control environment had an essential issue on separation of duties. In PFG, only Russell Wasendorf could open the real bank balance, which gave the opportunity to Wasendorf. Peregrine was suffer from a huge loss in operations, which gave incentive to Wasendorf. He needed to decide whether fraud or bankrupt. Peregrine’s philosophy and operating style was “either predator or prey”, which shown the attitude of Wasendorf was aggressive and he could not afford of bankrupt. As a result, Peregrine had incentive, opportunity and attitude to commit fraud.

2. What are the primary procedures used to audit cash balances? What significant inherent and control risk present at Peregrine would impact the nature and extent of the procedures to be performed?
The primary procedures are used to test the reasonableness of cash balance. They are existence to test whether the cash is accrual exist, completeness to test whether the cash can reflect all cash transaction at the end of the period, rights and obligation to test whether the client have
It is the effective way to detect fraud because the auditors could communicated with the client’ bank directly. As a result, the information could not be changed by clients when they were transferring the paper confirmation. Standard written back confirmations have not been effective in detecting the fraud at Peregrine. According to the case, Peregrine changed the information by using Photoshop, Excel, scanners and printers when they were using standard written back confirmations. However when the company agreed to using electronic confirmation, it decided to commit fraud