Question 1
Some of the fraud risk factors at Peregrine include; the nature of transactions (cash), Separation of duties, Complexity of transactions, dominance, and expectations. The fraud triangle includes three portions in order for fraud to take place; these portions are opportunity, rationalization, and pressure. The risk of fraud decreases significantly when multiple employees are involved in different phases of a transaction. During the embezzlement Wasendorf, was the only one in the company who was able to see each transaction from the bank. This would give him the opportunity to forge the notes to show the public, he had the pressure on him to continue what he had started in order to keep the company afloat, as well he was rational in …show more content…
In order to get a confirmation, the auditors will ask the company 's bankers to verify that the balances of bank accounts have been fairly presented. In this case though, since only Wasendorf had seen the actual bank statements, he was able to forge a confirmation letter from the bank confirming what his otherwise forged statements had presented. This would signify a weak internal control and should have been flagged and should have been confirmed by going directly to the bank. During an audit, most auditors believe that confirming cash balances is mostly tedious, this makes it easy to commit fraud as they will not actually did that deep into the cash because a company normally either has cash or does not have the cash. Some inherent risks of Peregrine would include the complexity of their transactions, the complicated relationships that they hold with other companies, how the company has a large number of investor and client relationships and related parties are less transparent than separate entities. Most of the inherent risks involved with Peregrine are the inherent risks that affect the industry as a whole. Being an auditor of a company requires you to have significant knowledge of the industry and company. In this particular case if the auditors had this knowledge or expertise they would possibly have been able to catch the fraud before Wasendorf had given himself up to the …show more content…
This means that the CPA firm had weak internal controls. Also being a small firm the operator could have just wanted a big contract as such to be renewed every year making it easy on them to over look some things they may have found to be out of the ordinary such as the bank account addressed to a mail box. Yes I do believe that this should have been a red flag for regulators. This should have been a red flag for several reasons. First this could have been an indicator of collusion. Although they may have not known each other prior to becoming the auditor Wasendorf could have been giving the accountant a lump sum of cash in order to pass the audit. Secondly, being a one person firm is a indicator of weak control risks. Due it not being able to segregate duties you have no second set of eyes looking at the same paper and not questioning something that the other may not have caught. In addition, being a one person audit firm who continually had got the contract to Peregrine could have not reassessed the audit risk and just taken on the project just based on past experiences, making the audit
Some of the fraud risk factors at Peregrine include; the nature of transactions (cash), Separation of duties, Complexity of transactions, dominance, and expectations. The fraud triangle includes three portions in order for fraud to take place; these portions are opportunity, rationalization, and pressure. The risk of fraud decreases significantly when multiple employees are involved in different phases of a transaction. During the embezzlement Wasendorf, was the only one in the company who was able to see each transaction from the bank. This would give him the opportunity to forge the notes to show the public, he had the pressure on him to continue what he had started in order to keep the company afloat, as well he was rational in …show more content…
In order to get a confirmation, the auditors will ask the company 's bankers to verify that the balances of bank accounts have been fairly presented. In this case though, since only Wasendorf had seen the actual bank statements, he was able to forge a confirmation letter from the bank confirming what his otherwise forged statements had presented. This would signify a weak internal control and should have been flagged and should have been confirmed by going directly to the bank. During an audit, most auditors believe that confirming cash balances is mostly tedious, this makes it easy to commit fraud as they will not actually did that deep into the cash because a company normally either has cash or does not have the cash. Some inherent risks of Peregrine would include the complexity of their transactions, the complicated relationships that they hold with other companies, how the company has a large number of investor and client relationships and related parties are less transparent than separate entities. Most of the inherent risks involved with Peregrine are the inherent risks that affect the industry as a whole. Being an auditor of a company requires you to have significant knowledge of the industry and company. In this particular case if the auditors had this knowledge or expertise they would possibly have been able to catch the fraud before Wasendorf had given himself up to the …show more content…
This means that the CPA firm had weak internal controls. Also being a small firm the operator could have just wanted a big contract as such to be renewed every year making it easy on them to over look some things they may have found to be out of the ordinary such as the bank account addressed to a mail box. Yes I do believe that this should have been a red flag for regulators. This should have been a red flag for several reasons. First this could have been an indicator of collusion. Although they may have not known each other prior to becoming the auditor Wasendorf could have been giving the accountant a lump sum of cash in order to pass the audit. Secondly, being a one person firm is a indicator of weak control risks. Due it not being able to segregate duties you have no second set of eyes looking at the same paper and not questioning something that the other may not have caught. In addition, being a one person audit firm who continually had got the contract to Peregrine could have not reassessed the audit risk and just taken on the project just based on past experiences, making the audit