Our discussion this week will focus on the factors listed on page 649 (Principles of Auditing and Other Assurance Services. 20th ed.) which are likely to be material from a qualitative perspective. If you carefully consider those factors listed, many seem to be indicative of fraud. Remember that fraud is an intentional act to deceive. Find an article about a recent fraud (2015 to the present). As you read the article, put yourself in the place of the auditor of the company. How would you evaluate the qualitative factors related to the fraud which resulted in financial misstatement?
Pick what you think would be the most significant qualitative factor and, in your initial post, briefly describe the fraud and the qualitative factor; also be sure and attach the article so your classmates can read it. Answer the following questions:
1) How would you evaluate that factor from a reasonableness standard?
2) As the auditor, what additional information do you feel you would need in order to make an informed judgment?
3) What would be other positive or negative factors within the organization that would influence your evaluation? Be specific and explain each factor.
4) Lastly, what would be your recommendation to management on how they could improve internal control in order to prevent the fraud and improve the qualitative factor in the future?