Acca aaa s21 Notes

September 2021 to June 2022 exams
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Three conditions are usually present when fraud exists:
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Incentive or pressure to commit the fraud
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Opportunity to commit the fraud
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Attitude to go through with the fraud
At the planning stage the susceptibility of an entity to fraud should be discussed with the audit team 
and with management of the client. The following are examples of fraud risk factors that indicate an 
increased risk of fraud:
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Lack of segregation of duties or independent checks.
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Significant deficiencies in internal control components (e.g. ineffective internal audit function).
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Management failing to remedy known significant deficiencies in internal control on a timely 
basis.
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Complex transactions that pose difficult 'substance over form' questions.
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Significant estimates that are difficult to corroborate.
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Easy-to-steal assets: cash, compact but high-value inventory.
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Complex group structures so that related party transactions are difficult to discover.
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Excessive pressure on management to meet financial targets.
A fraud must be communicated to TCWG if it results in material misstatement or if management is 
implicated. Other frauds should be communicated to a suitable level of management. It is important, 
even for what appears to be a small fraud, to investigate how long it has been going on for, how 
much is involved and who is behind the fraud.
In exceptional circumstances, the auditor may be unable to continue performing the audit. For 
example:
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Management or TCWG appear to be responsible for committing a fraud.
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There is a significant risk of material and pervasive fraud.
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Failure to take appropriate action raises significant concern about management's integrity.