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What do you believe are the most effective audit procedures to use to identify executive compensa...

What do you believe are the most effective audit procedures to use to identify executive compensation abuse or fraud? Support your opinions and recommended audit procedures.

audit procedures to use to identify executive compensation abuse or fraud

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Answer #1

The most effective audit procedures to use to identify executive compensation abuse or fraud are:-

1. Inquiring management and others within the entity

The auditor shall make inquiries of management regarding :-

  • management's assessment of risk of material misstatement due to fraud.
  • management's process for identifying and responding to the risk of fraud in the entity.
  • management's communication, if any, to those charged with governance
  • management is responsible for the entity's internal control and for the preparation of the financial statements, so accordingly it is appropriate for the auditor to make inquiries of management regarding management's own assessment of the risk of fraud and the controls in place to prevent and detect it.

2. Inquiring with Those charged with governance

  • Auditor shall obtain an understanding of how the persons who are charged with governance supervise management's processes.

3.Unusual or unexpected relationships identified

  • The auditor shall evaluate whether unusual or unexpected relationships identified in performing analytical procedures, may indicate risks of material misstatement due to fraud.

4. Evaluation of fraud risk factors

  • The auditor shall evaluate whether the information obtained, indicates that one or more fraud risk factors are present.
  • The auditor shall identify and assess the risks of material misstatement due to fraud.
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