Peregrine Fraud Case Study

1) At Peregrine, the risk factors, especially those aligned with control environment factors and the “tone at the top” are discussed. The risks included having a paper based confirmation system for the entire business; no segregation of duties, which meant that only one or very few people were working on the financial statements, and in this case Mr. Wasendorf was the only one and had altered all bank documents using only Photoshop, excel, scanners, and printers. Continuing on, time off was not required at Peregrine, which could have ultimately discovered this fraud much earlier, by allowing someone else to sit in the absentee’s seat and review all of their work. Additionally, Peregrine lacked internal auditors or an audit committee at the time. The presence of the internal auditors could have decreased odds of misstatement incentives to commit fraud by management, called fraudulent financial reporting, and overseen …show more content…
In this case, the inherent risks included everything to be in cash or liquid assets, its type of business, management being dominated by one individual. the CEO Mr. Wasendorf. Additionally, the previous years’ statements showed stable profits and Mr. Wasendorf had to keep that going. Also, senior managements have motivation to report fraudulently to increase bonuses, all of these increase inherent risk at Peregrine. Moving on, control risks are the measure that error/misstatements are not detected with the use of the pre-existing internal controls present. In this case, the corporate governance, the rules/laws used by the company are controlled, was lacking severely, laws were broken by the use of fraudulent statements and theft, all of which are unethical. Furthermore, internal controls, are dependent on the competency of the system or individual. Further, internal controls in place were easily