Читать книгу Wiley Practitioner's Guide to GAAS 2020 - Joanne M. Flood - Страница 125

1 The nature of the industry or the entity’s operations provides opportunities to engage in fraudulent financial reporting that can arise from the following:Significant related-party transactions not in the ordinary course of business or with related entities not audited or audited by another firm.A strong financial presence or ability to dominate a certain industry sector that allows the entity to dictate terms or conditions to suppliers or customers that may result in inappropriate or non-arm’s-length transactions.Assets, liabilities, revenues, or expenses based on significant estimates that involve subjective judgments or uncertainties that are difficult to corroborate.Significant, unusual, or highly complex transactions, especially those close to period-end that pose difficult “substance over form” questions.Significant operations located or conducted across international borders in jurisdictions where differing business environments and cultures exist.Significant bank accounts or subsidiary or branch operations in tax-haven jurisdictions for which there appears to be no clear business justification.

2 There is ineffective monitoring of management as a result of the following:Domination of management by a single person or small group (in a nonowner-managed business) without compensating controls.Ineffective board of directors or audit committee oversight over the financial reporting process and internal control.

3 There is a complex or unstable organizational structure, as evidenced by the following:Difficulty in determining the organization or individuals who have controlling interest in the entity.Overly complex organizational structure involving unusual legal entities or managerial lines of authority.High turnover of senior management, counsel, or board members.

4 Internal control components are deficient as a result of the following:Inadequate monitoring of controls, including automated controls and controls over interim financial reporting (where external reporting is required).High turnover rates or employment of ineffective accounting, internal audit, or information technology staff.Ineffective accounting and information systems, including situations involving reportable conditions.Weak controls over budget preparation and development and compliance with law or regulation.