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Fraud, Errors and Illegal Acts

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Management should bear the cost of compliance to improve / revamp existing system for an effective internal control. Aditors should not encroach upon the discretions of management for implementation of comprehensive procedure concerning effective internal controls or overcome the internal control deficiencies. Aditors shall advise the management or the competent committee on audit to initiate the process of effective internal control as early as possible (Gay, Shelluch & Reid 1997). Wth regard to SAS # 82, aditors are responsible to plan and execute the audit in order to assurance regarding availability of financial statement free from misstatement.

Te auditors have to examine statement in question to provide guidance to the management on the basis of their evaluation and fact findings. Te responsibility of an auditor is to detect frauds, erors and illegal acts and suggest remedial measures to the management for prevention of such frauds in future (Zimbelman 1997). T combat identified menace, mnagement should focus on an effective internal controls, sgregation of functional responsibilities of the employees. Tke the example of Manager Credit and Manager Credit a financial institution.

Te functional responsibility of Manager Credit is to assess the need of the customer. Ater determining the need of the customer, h raises the proposal for financing and documents to be obtained there against to secure exposure. Te responsibility of Manager Credit to check the documents to be obtained against sanctioned finance and kept it in a centralized location at Head Office and not with the branch where the credit of the customer is parked. Peviously the dual function rests with the Manager Credit, wich temptation frauds (Gay, Shelluch & Reid 1997).

Tis is the best example of segregation of duties aims at to strengthen the internal control, wich helps preventing frauds, erors and illegal acts. Mnagement should place honest people who have a good record of accomplishment to manage the affairs of the company. H of the company should select employees who have the fame of honesty, itegrity and loyalty to the institution for a smooth sail. Mnagement should introduce tough selection criteria for placement of employees on responsible positions (AICPA 2002). of ideal in an. ..

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