Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p13
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 13/41)
Character Range: 47036–50314

management override of controls that otherwise may appear to be operating effectively.  Fraud can be committed by management overriding controls using such techniques as intentionally:

           * Recording fictitious journal entries, particularly close to the end of an accounting period, to manipulate operating results or achieve other objectives.

           * Inappropriately adjusting assumptions and changing judgements used to estimate account balances.

           * Omitting, advancing or delaying recognition in the financial statements of events and transactions that have occurred during the reporting period.

           * Omitting, obscuring or misstating disclosures required by the applicable financial reporting framework, or disclosures that are necessary to achieve fair presentation.

           * Concealing facts that could affect the amounts recorded in the financial report.

           * Engaging in complex transactions that are structured to misrepresent the financial position or financial performance of the entity.

           * Altering records and terms related to significant and unusual transactions.

A5.             Misappropriation of assets involves the theft of an entity's assets and is often perpetrated by employees in relatively small and immaterial amounts.  However, it can also involve management who are usually more able to disguise or conceal misappropriations in ways that are difficult to detect.  Misappropriation of assets can be accomplished in a variety of ways including:

           * Embezzling receipts (for example, misappropriating collections on accounts receivable or diverting receipts in respect of written‑off accounts to personal bank accounts).

           * Stealing physical assets or intellectual property (for example, stealing inventory for personal use or for sale, stealing scrap for resale, colluding with a competitor by disclosing technological data in return for payment).

           * Causing an entity to pay for goods and services not received (for example, payments to fictitious vendors, kickbacks paid by vendors to the entity's purchasing agents in return for inflating prices, payments to fictitious employees).

           * Using an entity's assets for personal use (for example, using the entity's assets as collateral for a personal loan or a loan to a related party).

           * Misappropriation of assets is often accompanied by false or misleading records or documents in order to conceal the fact that the assets are missing or have been pledged without proper authorisation.

Responsibility for the Prevention and Detection of Fraud

Responsibilities of the Auditor (Ref: Para. 9)

A6.             Law, regulation or relevant ethical requirements may require the auditor to perform additional procedures and take further actions. For example, the APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting and Professional and Ethical Standards Board requires the auditor to take steps to respond to identified or suspected non‑compliance with laws and regulations and determine whether further action is needed. Such steps may include the communication of identified or suspected non‑compliance with laws and regulations