Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p35
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 35/41)
Character Range: 110273–113440

complete and timely reconciliations of assets.

      * Lack of timely and appropriate documentation of transactions, for example, credits for merchandise returns.

      * Lack of mandatory holidays for employees performing key control functions.

      * Inadequate management understanding of information technology, which enables information technology employees to perpetrate a misappropriation.

      * Inadequate access controls over automated records, including controls over and review of computer systems event logs.

Attitudes/Rationalisations

      * Disregard for the need for monitoring or reducing risks related to misappropriations of assets.

      * Disregard for controls over misappropriation of assets by overriding existing controls or by failing to take appropriate remedial action on known deficiencies in internal control.

      * Behaviour indicating displeasure or dissatisfaction with the entity or its treatment of the employee.

      * Changes in behaviour or lifestyle that may indicate assets have been misappropriated.

      * Tolerance of petty theft.

Appendix 2

(Ref: Para. A41)

Examples of Possible Audit Procedures to Address the Assessed Risks of Material Misstatement Due to Fraud

The following are examples of possible audit procedures to address the assessed risks of material misstatement due to fraud resulting from both fraudulent financial reporting and misappropriation of assets.  Although these procedures cover a broad range of situations, they are only examples and, accordingly they may not be the most appropriate nor necessary in each circumstance.  Also the order of the procedures provided is not intended to reflect their relative importance.

Consideration at the Assertion Level

Specific responses to the auditor's assessment of the risks of material misstatement due to fraud will vary depending upon the types or combinations of fraud risk factors or conditions identified, and the classes of transactions, account balances, disclosures and assertions they may affect.

The following are specific examples of responses:

      * Visiting locations or performing certain tests on a surprise or unannounced basis.  For example, observing inventory at locations where auditor attendance has not been previously announced or counting cash at a particular date on a surprise basis.

      * Requesting that inventories be counted at the end of the reporting period or on a date closer to period end to minimise the risk of manipulation of balances in the period between the date of completion of the count and the end of the reporting period.

      * Altering the audit approach in the current year.  For example, contacting major customers and suppliers orally in addition to sending written confirmation, sending confirmation requests to a specific party within an organisation, or seeking more or different information.

      * Performing a detailed review of the entity's month‑end or year‑end adjusting entries and investigating any that appear unusual as to nature or amount.

      * For significant and unusual transactions, particularly those occurring at or near year‑end, investigating the