Assessment Answers | Audit Steps to Find the Fraud: ACG6688

Assessment Answers | Audit Steps to Find the Fraud: ACG6688

Running Head: FORENSIC ACCOUNTING: ETHICS AND THE LEGAL
ENVIRONMENT
FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
Name of the Student
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Running Head: FORENSIC ACCOUNTING: ETHICS AND THE LEGAL
ENVIRONMENT
FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
Name of the Student
Name of the University
Author Note
1 FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
Table of Contents
Answer 1: Audit Steps to Find the Fraud ………………………………………………………………………. 2
Answer 2: Proactive Auditing and its Comparison with the Reactive Auditing ………………….. 2
Answer 3: Advice for Logan ……………………………………………………………………………………….. 3
Reference ………………………………………………………………………………………………………………….. 4
2 FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
Answer 1: Audit Steps to Find the Fraud
One of the most key ways of detecting fraud in the entity is receiving an anonymous
tip. For independently investigating the tip, it is important that it directly go to the the
external auditors of the entity. The five steps that can be suggested for finding out the fraud
are as follows:
 The company ’s internal control system must be examined by looking at the
occurrence of sales and collections. All the transactions related to the sales must be
cross-checked with the cash or cheques received (Zakaria, Nawawi & Salin 2016).
ï‚· Ensuring that all the cheques and cash received are recorded promptly and are
deposited in the its original received form.
ï‚· A receipt for the cash must be issued by using the pre-numbered book of receipt.
ï‚· Conducting an uninformed counting of cash.
ï‚· Reconciling the overall cash receipts on the daily basis with the suitable
documentation, such as receipt books, cash reports, bank statement, and others.
Whenever possible, the cash receipts should be centralized (Joseph, Albert &
Byaruhanga, 2015).
Answer 2: Proactive Auditing and its Comparison with the Reactive Auditing
The audits must be both reactive and proactive that implies that the entities have the
obligations of seeking out the errors along with appropriately reacting after finding out the
errors. A proactive audit help in providing akey insight into the way program of compliance
is functioning, improvement requirement, and the enhancement of the entity ’s financial
controls and compliance. The proactive auditors attempt to achieve the outcomes of quality
audit. Being proactive is important because auditors work in the dynamic and complex
environment, where there is unavailability of the complete directives (Peecher, Ricci & Zhou,
3 FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
2020). In comparison, reactive audit is commenced only when ant fraud is suspected. It
comprises dealing with the audit and taking preventive measures. Proactive auditing starts
before the reactive auditing. Some of the techniques that can be used by the proactive
auditors are computer-based tools of proactive fraud auditing and forensic auditing, such as
fraud triangle, data mining techniques, data analysis software and other software. The
advancement of the technology has resulted into a paradigm shift from being reactive to
being proactive auditors (Akenbor & Ironkwe, 2014).
Answer 3: Advice for Logan
The accounting work done by Logan is improper. Since Logan is arecent graduate in
the accounting program, he is inexperienced in understanding the transaction and recording
proper journal entries. For instance, when the company ’sowner sold its car for $38,000,
Logan credited the BMW X3 by $38,000. The car sales of $38,000 must be credited with the
sales revenue rather than BMW X3, 3.01 SUV. Likewise, the owner-Joe dropped off the
documentation that indicated that the loan of $9,900 had been paid off, for which Logan has
made the entries. Likewise, the other entries of loan repayment were made by Logan as per
the documentation shown. The company is encouraging its accountant to perform the
unethical act, since Joe has paid Logan abonus for misstating the figure. Hence, Logan needs
to understand the fact that his owner is giving the incentive for favoring the unethical conduct.
Logan must put the right journal entries and must cross-check all the documents provided by
the owner (Schultz & Tropmann-Frick, 2020).
4 FORENSIC ACCOUNTING: ETHICS AND THE LEGAL ENVIRONMENT
Reference
Akenbor, C. O., & Ironkwe, U. (2014). Forensic auditing techniques and fraudulent practices
of public institutions in Nigeria. Journal of Modern Accounting and Auditing ,10 (4).
Joseph, O. N., Albert, O., & Byaruhanga, J. (2015). Effect of internal control on fraud
detection and prevention in district treasuries of Kakamega County. International
Journal of Business and management invention ,4(1), 47-57.
Peecher, M. E., Ricci, M., & Zhou, Y. D. (2020). Promoting proactive auditing
behaviors. Available at SSRN 3636498 .
Schultz, M., & Tropmann-Frick, M. (2020). Autoencoder neural networks versus external
auditors: Detecting unusual journal entries in financial statement audits.
Zakaria, K. M., Nawawi, A., & Salin, A. S. A. P. (2016). Internal controls and fraud –
empirical evidence from oil and gas company. Journal of Financial crime .

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