The self-made teenage millionaire Berry Minkow used to be called Whiz kid by founding his own carpet cleaning company, Z-Best, which was net worth over million dollars. After few years, his net worth was accused by bank fraud, embezzlement, and securities fraud which are typically fraud risk and because of insufficient proof as well as fake evidence caused him in jail more than a decade (Video A).
1. Fraud Risk:
First of all, fraud risk defined as two different frauds which are individually fraudulent financial reporting and misappropriation of assets. The former one is that intentional misstatement or deletion of amounts or disclosures with the intent to deceive users and the latter one is that steal of entity’s assets (Moroney et al, 2017). …show more content…
In order to prevent such fraud happening again, auditors need to pay attention much on details. Previous examples caused the lack of high degree of judgement such as “built-in excuse”, which produced inherent risk to obtain money by approval of auditors. Auditors have to identify the risks of misstatement by comprehending the entity ad its environment (ASA 315). Similarly, the second example created auditors did not prevent financial information and material misstatement, which was control risk for him to fix details to generate profits. Auditors require to assess the risks of material misstatement (ASA 320). Much the same as the above, because auditors could not find the error as known as detection risk, he was able to take advantage from them who could inspect damaged house. External confirmation is required (ASA 505). In addition, why he was successful based on the two reasons. First, in terms of avoiding detection from auditors, he turned their attention to his legitimate carpet business. Second, auditing firms were competitive so as to not lacking of carefulness where the phony was from.
Overall, Minkow case caused by the auditor’s neglects, in terms of stopping fraud happens again, auditors need to concentrate on details and real information. In addition, through this case, auditors requires adequate evidence to support their
1. Fraud Risk:
First of all, fraud risk defined as two different frauds which are individually fraudulent financial reporting and misappropriation of assets. The former one is that intentional misstatement or deletion of amounts or disclosures with the intent to deceive users and the latter one is that steal of entity’s assets (Moroney et al, 2017). …show more content…
In order to prevent such fraud happening again, auditors need to pay attention much on details. Previous examples caused the lack of high degree of judgement such as “built-in excuse”, which produced inherent risk to obtain money by approval of auditors. Auditors have to identify the risks of misstatement by comprehending the entity ad its environment (ASA 315). Similarly, the second example created auditors did not prevent financial information and material misstatement, which was control risk for him to fix details to generate profits. Auditors require to assess the risks of material misstatement (ASA 320). Much the same as the above, because auditors could not find the error as known as detection risk, he was able to take advantage from them who could inspect damaged house. External confirmation is required (ASA 505). In addition, why he was successful based on the two reasons. First, in terms of avoiding detection from auditors, he turned their attention to his legitimate carpet business. Second, auditing firms were competitive so as to not lacking of carefulness where the phony was from.
Overall, Minkow case caused by the auditor’s neglects, in terms of stopping fraud happens again, auditors need to concentrate on details and real information. In addition, through this case, auditors requires adequate evidence to support their