AUDIT FRAUD RISK ASSESSMENT (SA 240)
Client : xyz Client Representative: [Link] from AA
Inquiry to Gain Understanding a) To ensure the commitment of the management regarding fraud prevention, deterrence and detection.
Management Response (Name & Designation)
Was there any fraud perpetrated or alleged or
suspected in the near past that could result in a material misstatement of the entity's financial statements? Have you received any letters or communications from employees, former employees, analysts, short sellers or others concerning allegations of fraud?
As confirmed in all the past auditing years,we confirm that there has been no fraud perpetrated or alleged or suspected that could result in a material misstatement of entity financial statement
What incentives and pressures do you perceive
to be on management and how are the related risks managed?
We have not received any letters or communications from employees, former employees, analysts, short sellers or others concerning allegations of fraud.
Where fraud or potential fraud is identified,
There are no such incentives and pressure to be on management.
what is the course of action by the management? There are no fraud or potential fraud that has come across during the year.
b) To gain an understanding of managements assessment of fraud risk and controls to mitigate the same. What are the risks of fraud as per your understanding in your Industry? There are no risk of any fraud or potential as it is a closely held company with limited staff.
Has the entity identified any fraud risks in
relation to any Financial Statement Area Transaction Stream?
The entity has not identified any fraud risks in relation to any Financial Statement Area Transaction Stream.
What are the controls devised by the
Monitored by the management.
Initials of Client Representative
management in relation to the above identified areas to mitigate such risk? How are those controls monitored? Are the Journal Entries & adjustments made with proper authorizations?
The Journal Entries & adjustments are made with proper authorizations from Management
Inquiry to Gain Understanding c) To understand how management communicates its views on mitigation of fraud risks to others in the organisation. What are the means of communication through which management communicates its views on practices and ethics? Whether management has reported to the audit committee and responsibility on its processes for identifying and responding to the fraud risks in the entity? NA
Management Response (Name & Designation)
NA
The Board has a general view saying they have enough controls to mitigate fraud risk.
Whether management believes internal control
serves to prevent, deter, or detect material misstatement due to fraud? NA
What are the views of Audit Committee / Board on the operating effectiveness of Internal Control to mitigate the Fraud risks? For Listed Companies inquire about matters raised from the audit committee
NA
i. Procedure for receipt, retention and
treatment of complaints (including whistleblowers) regarding accounting ii. Internal accounting controls iii. Auditing matters including procedure for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters
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d) Understanding of Monitoring of locations or segments of business by Management How does the management monitor the controls that are operative at various locations or segments that are designed to mitigate fraud risks? Is any of the location or segment more susceptible to fraud? How are the views of the Audit Committee/ Board communicated to the organisation? Explain the procedures (if any) to review the operations of locations or segments that would indicate unusual or unexpected variations & how are the same resolved. e) Understanding about Internal audit function N.A
Whether client has internal audit function? If No, then whether its absence constitutes a fraud risk factor or affects our assessment of the effectiveness of internal control at the entity level? Entities that have an internal audit function, inquire of appropriate internal audit personnel about : i. Their views of the fraud risks
NA NA
ii. Whether they have performed any
procedures to identify or detect fraud during the year? iii. Activities concerning the design and effectiveness of the entitys internal controls
iv. Whether management has satisfactorily
responded to any findings resulting from these procedures?
v. Whether the internal auditors have
knowledge of any actual, suspected or alleged fraud?
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