An Example of an
Attestation Engagement, Fraud Scheme, etc.
1) Describe an example
of an attestation engagement.
2) Describe a fraud
scheme that could be used for information assets and explain the controls that
can mitigate this fraud risk.
3) Explain the links
between business continuity, system availability, and disaster recovery.
The completeness
assertion is crucial for accounts payable. A common financial statement
misstatement involves companies moving current liabilities from accounts
payable to long term liabilities or to some other account in order to improve
their financial statement liquidity ratios. When a company begins to drown in
their accounts payable balance, it diminishes the financial strength of their
balance sheet. In addition, many companies have debt covenants in place
attached to their long term and short term debt, and the covenants usually
state that current liabilities must be kept below a certain amount. If the A/P
has climbed above an acceptable amount, it gives management the motivation to
move A/P to another area, or to postpone posting A/P transactions that should
be included in the current financial statement, until the next period. When an
auditor tests for the completeness assertion for accounts payable, the auditor
is testing to verify that all A/P transactions which should be included are
included in the financial statements, and that they are being carried at the
proper amounts.
4) Accounts payable is
usually the largest current liability in a balance sheet and a significant
factor in evaluating an entity’s short-term solvency. The audit of payables places
greater emphasis on the completeness assertion. The reason for this is that if
management were motivated to misrepresent payables, it would likely be to
understate them in order to report a more favorable financial position.
Correct?
If management is held
too rigidly to delivering targeted earnings, it may cause the incentive to
misstate the financial statement through the management of purchases cutoff or
other steps that result in unrecorded liabilities.
