Auditing for Risk, Errors & Fraud

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Detecting Creative Revenue Accounting in Financial Reports

Analyzing financial reports is difficult enough, but the tricks used for reporting revenue add another layer of complexity. You can see through many common creative accounting tactics by carefully analyzing [more…]

Taking a Look at a Sarbanes-Oxley Overview

In response to a loss of confidence among American investors reminiscent of the Great Depression, President George W. Bush signed the Sarbanes-Oxley Act into law on July 30, 2002. SOX, as the law was quickly [more…]

Avoiding Lawsuits and Prosecution under Sarbanes-Oxley

How do you keep yourself, your department, and your company out of the Sarbanes-Oxley (SOX) spotlight? Here are a few tips for keeping the litigators off your doorstep and sleeping soundly with SOX compliance [more…]

The Scope of Sarbanes-Oxley: Securities and Issuers

To understand which parts of SOX apply to your company, you need to understand what type of investments are considered securities and which types of issuers are subject to or exempt from SOX. [more…]

Watching for Illegal Accounting Practices in Your Business

Fraud, embezzlement, and misappropriation can occur in every size of business. Such illegal accounting practices require manipulation of a business’s accounts. Keep your eyes open for these kinds of illegal [more…]

How to Limit Corporate Liability after Sarbanes-Oxley

The Sarbanes-Oxley Act (SOX) provides a legal model for running corporations of all sizes, regardless of whether they’re publicly traded and technically subject to SOX. The best legal minds agree that [more…]

Sarbanes-Oxley Practices for Good Corporate Governance

Sarbanes-Oxley (SOX) was passed to combat corruption at big public companies like Enron, WorldCom, Tyco, Adelphia, Global TelLink, HealthSouth, and Arthur Andersen. But small and not-for-profit companies [more…]

How to Perform an Audit in a High-Risk Situation

If an audit engagement is high-risk, you have to sit back, evaluate how the company does business, and think about how material misstatements may slip through the cracks. You then design an extended audit [more…]

Using the Audit Risk Model

When you audit a company, your main goal is to provide assurance to the users of the company’s financial statements that those documents are free of material misstatement [more…]

How to Assess Inherent Risk in an Audit

Auditors must determine risks when working with clients. One type of risk to be aware of is inherent risk. While assessing this level of risk, you ignore whether the client has internal controls in place [more…]

How to Assess Control Risk When Performing an Audit

During your risk-assessment procedures before you begin an audit, you interview members of the company and observe how they do their jobs to make your assessment of control risk. Company management is [more…]

How to Assess Detection Risk in an Audit

Detection risk occurs when you don’t use the right audit procedures or you don’t use them correctly. You assess inherent and control risk and then solve your audit risk equation by assigning detection [more…]

How to Follow Risk Assessment Procedures in an Audit

When performing an audit, you use risk assessment procedures to assess the risk that material misstatement exists. This step is very important because the whole point of a financial statement audit is [more…]

Auditing Basics: How to Distinguish Between Errors and Fraud

When you find misstatements as you perform an audit, you’re responsible for making an assessment. You alone must determine whether the misstatement represents an error or fraud. Errors aren’t deliberate [more…]

How to Recognize the Triangle of Fraud

You’ll hear auditors referring to the triangle of fraud. That’s because in most fraudulent acts, three circumstances lead to the commission of fraud: the incentive to commit fraud, the opportunity to carry [more…]

How to Tailor Your Audit to a Low-Risk Situation

After completing your risk assessment procedures and deciding if any misstatements are material, you need to evaluate your findings. You must decide if you can use normal audit procedures [more…]

How to Document Audit Risk Results

As you do your investigative work getting to know your audit client, following your risk assessment procedures, and assessing the risk of material misstatement, you must extensively document everything [more…]

How to Deal with Sampling Risk During an Audit

Although you can never guarantee that an audit is 100-percent accurate, the sample of records you choose is crucial to helping you achieve as much accuracy as possible. The choices you make when determining [more…]

Assessing the Inherent Risk of Selling Goods and Services

When performing an audit, you look at revenue transactions. As the auditor you need to factor in any inherently risky circumstances that affect the revenue accounts. Generally, you look at four inherent [more…]

Spotting Business Financial Statement Fraud

Financial statement fraud, commonly referred to as "cooking the books," involves deliberately overstating assets, revenues, and profits and/or understating liabilities, expenses, and losses. A business [more…]

How to Prevent Employee Fraud

Businesses lose huge sums of money each year to fraud committed by their employees. Small businesses and large businesses alike must establish strong internal controls to prevent employee fraud, whether [more…]

How to Detect Errors and Fraud in Payroll

If payroll fraud exists, it is likely to occur in one of three ways: During an audit you can use the following methods to detect all three circumstances of payroll error and fraud: through paying fictitious [more…]

How to Test Accrued Payroll Liabilities

Making sure the company books its payroll accruals properly is fairly easy. By the time you conduct your audit, all employees whose unpaid payroll transactions should have been accrued have been paid. [more…]

How to Assess Inherent Inventory Management Risks

At every step of an audit, you have to consider risks and their associated controls. At this inventory stage, your focus is on identifying risks that exist in the inventory management process and the internal [more…]

How to Assess Inventory Management Control Risk

When you assess a client’s inventory management control risk during your audit, remember that the business’s internal controls directly affect that risk. The inventory management process has control risk [more…]


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