Fraud Risk






Inthe above dialog, Smith seems to be in adhering to the auditingstandards but Kent is trying to ignore the standards. Smith isrecognizing the changes in Super Computer Service Co. that may resultin increased risk of fraud. However, Kent who is the engagementpartner is insisting that the audit process to be carried out as theyhave been doing in the past. This situation is putting Smith in adilemma since his boss Kent is trying to convince him to assume theexposure for risk of fraudulent.

Intheir conversation, it is revealed that the management is more likelyto commit a fraudulent financial action. The management of SCSCompany has a great influence on the preparation of financialstatements that may increase the incentive/pressure for fraud. Forinstance, the desire to meet Mint’s expectations of 30 percentincrease in retained earnings may lead to high risk for fraudulentfinancial reporting. The independence of the internal audit committeeis also compromised, and this is can create opportunities for fraudrisk.


Kentseems to be having a misconception regarding the consideration offraud in Super Computer Services Co. This is because he is claimingthat their work is not to provide assurance about fraud, but it ismanagement`s work. He is also saying that their bottom line is toensure that the financial statements are fairly presented. This iscontrary to the auditing standards that require the auditor to takefull responsibility of identifying and investigating the fraud in thefirm.


Auditdocumentation shows the big change in the requirements that theauditors must observe when undertaking their audit work (Gramling etal., 2011). It provides guidance on the extent and the nature of theauditor’s report. Documentation therefore, acts as the major toolfor supervising the audit. The auditor must document the proceduresfollowed, the evidence obtains and their conclusion for theirpresentation.


LarryR., Karla J. &amp Gramling A. (2011). Auditing:A Business Risk Approach 8thEdition. London:CengageLearning.