1. Give short answers for the following questions: (12)
i. Explain the term ‘fraud risk factors.’
ii. What control mechanisms could be adopted against corruption?
iii. Outline the main benefits of using analytic procedures in an audit process.
iv. What are the common rationalisations for a fraudster, which tempt him to commit fraud?
v. Outline the important points to be considered when evaluating fraud risk factors.
vi. Analytic procedures are used throughout the audit process for three primary purposes.
What are they?
2. ‘Circumstances may exist that create opportunities for management or other staff to commit
fraud’. Discuss (5)
3. SAS 99 suggests that key sources for the identification of fraud risk factors are inquiries of
Management,’ in this context which type of questions should an auditor ask the management? (5)
Case Study (8)
A man was on remand in prison having been charged with drug dealing. No drugs were ever found and the
evidence against him was simply that he owned a number of properties but worked as a cleaner in a local
factory. The implication was that the property purchases could only have been funded from the proceeds of
crime. The man denied this. A forensic expert was instructed to review the man’s financial affairs and explain
how the man funded his lifestyle.
The expert made a detailed review of the man and his family’s financial affairs, starting at the time he bought
his first property. The records explained the sources of all the funds used to buy the properties. It showed how
the man had used equity created through the legitimate purchase and sale of other properties to create his
portfolio and support his family’s lifestyle. The court accepted this fraud investigation report in its entirety and
the man was released from remand without charge.
i. What type of evidence do you think the expert would have gathered for his report?
ii. Which documents could have helped the forensic expert in gathering evidence?
