Required: For each of the foregoing risk factors listed in the left-hand column of the Table above, write in the right-hand column (i) the risk component that is most directly related to the following three option: Incentives/Pressures (I/P) Opportunity (O) Attitude/Rationalisation (A/R)
Required: For each of the foregoing risk factors listed in the left-hand column of the Table above, write in the right-hand column (i) the risk component that is most directly related to the following three option: Incentives/Pressures (I/P) Opportunity (O) Attitude/Rationalisation (A/R)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following table shows a number of factors recognised by the auditor as having an effect on the risk of fraud.
Note: Number 1 risk factor is completed for you as an example in the table below. Using the table below, write your answers for Number 2 to 6 in the table.
Required:
For each of the foregoing risk factors listed in the left-hand column of the Table above, write in the right-hand column (i) the risk component that is most directly related to the following three option:
Incentives/Pressures (I/P)
Opportunity (O)
Attitude/Rationalisation (A/R)
Transcribed Image Text:(1)
1) Management shows an excessive interest in increasing the
A/R
entity's share price.
2) The entity's industry is highly competitive.
3) The board of directors emphasises its operational executive
function over its supervisory/stewardship function.
| 4) The staff assigned to support the work of the audit committee
possesses inadequate accounting expertise.
5) Executives do not prepare improvement plans in response to the
corporate internal auditors' recommendation on improvements in
controls.
6) There is a corporate culture of obedience and loyalty and most
employees work in the same division from hiring date until
retirement.
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