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GAAP rules that will assist to determine the fraud in the key areas - Research Paper Example
This present research will begin with the explanation of the major problems that auditor has highlighted. The researcher of this report will attempt to evaluate and present the GAAP rules that will assist to determine the fraud in the key areas…
According to the research findings auditor has highlighted these major problems.
• Leases on technology assets seem inflated
• Understated of e Commerce state tax payment
• Fictitious employees receiving post-employment benefits
• Hiding cash in order to help in future quarters where earning do not meet analyst’s expectations
• Concealing inventory shrinkage because it seems low for the industry
There are many GAAP rules that assist to determine if the fraud is taking place all these areas. International GAAP, ISA 240 the Auditor Responsibilities Relating to Fraud in an Audit of Financial Statements recognizes that the misstatement in the financial statement can arise from the either fraud and error. The distinguishing factor is whether the underlying action that resulted in the misstatement was intentional or unintentional. The above all situations are supposed to be a fraud because the audit team found all these activities as a fraud. In relation with IAS 240, the fraud is a criminal activity. In addition, it is not a role of the auditor to determine whether the fraud is has actually occurred. That is the responsibility of a country’s legal system. Auditor must only be aware of the impact of fraud on the accuracy of financial statements. The GAPP rules state that the auditor is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatements, whether fraud and error. ISA 315 identifying and assessing the risk of material misstatements state assist to determine the determine fraud in the above mentioned situation.