While auditing XYZ Ltd your audit senior found that senior accounts payable clerk, Jillian Perkins, had been creating fake creditor's invoices from non-operating companies that she owned, for goods and services that were not provided to XYZ Ltd. She then paid the fake invoices with XYZ funds, resulting in money being transferred into her personal bank accounts. Interviews with fellow staff members indicate that Perkins is a compulsive gambler and that she has sustained some large gambling losses in recent months. Perkins has attempted to earn money to compensate for these losses by working large amounts of overtime and has often performed creditors reconciliations when other staff have been sick or on leave despite it not being part of her normal duties. She has had several arguments with the chief accountant about the number of overtime hours she has worked and amount she should be paid.

(a) What is the key account and assertion that is most at risk of misstatement as a result of this fraud? (1 mark for account and 1 mark for assertion)

(b) What is Jillian Perkins' incentive to commit the fraud? Justify your answer. (1 mark)

(c) Which factors give Jillian Perkins the opportunity to commit the fraud? Justify your answer. (1 mark)

(d) Which factors allow Jillian Perkins to rationalise the fraud? Justify your answer. (1 mark)

(e) List one piece of additional evidence the auditors should collect to determine if a fraud is actually taking place? Justify your answer.

Answer rating: 100% (QA)

a The key account that is most at risk of misstatement as a result of this fraud is Accounts Payable The assertion that is most at risk of misstatemen... View the full answer