Question

One of the elements of the Fraud Triangle focuses on how easy or hard it is for the internal control system to prevent any fraud from happening. 1) Briefly name and describe this part of the Fraud Triangle (4 pts - use about 3 sentences) 2) What are TWO procedures the Auditor would conduct in order to provide evidence about this part of the Fraud Triangle. (3 pts each - state the procedure and the evidence in about 2 sentences like... the procedure is X and the evidence is Y)

Answer 1

1.
Opportunity” to commit fraud is a risk factor that is heightened where internal controls are weak or non-existent. Companies with strong controls in place help to limit opportunities for employees to commit larceny or engage in fraudulent financial reporting. Companies with limited or no internal controls, such as lack of segregation of duties and/or little supervisory oversight, provide an easy opening for fraud to be perpetrated. For example, a business is at greater risk of fraud if the same employee is responsible for opening mail from customers, depositing checks, preparing billing and tracking customers’ accounts receivables. In this situation, an employee has more opportunities to divert funds into his or her pocket than an employee at a company that segregates responsibilities among a few employees so that their access to various corporate records and resources is limited, thereby reducing the opportunity to commit fraud.
2.

(I cannot exactly anwer this question in the way you want but this is all I know about this question.)
The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
AS no. 99 says, “When obtaining information about the entity and its environment, the auditor should consider whether the information indicates that one or more fraud risk factors are present.” As a practical matter, the application of SAS no. 22, Planning and Supervision, relating to audit planning, and SAS no. 55, Consideration of Internal Control in a Financial Statement Audit, as amended, relating to internal controls and the other sections of SAS no. 99, should allow you to identify the broad categories of fraud risks related to incentive/pressure and opportunity.