UNIVERSITY OF THE EAST - CALOOCAN CAMPUS

College of Business Administration

SY 2020 - 2021
BSA 3103 - Accounting Information System

NAME Alimot, Karen Clarisse M. CLASS ID: 2

SECTION BSA – 2E DATE September 2, 2020

Module No. : 3 Activity No.: 1

Topic : Ethics, Fraud, and Internal Control

Short Answer
Answer each question in a clear and organized paragraph. Each paragraph should include a clear
and precise thought that directly addresses the questions. This activity is worth 30 points in total,
based on the rubric for this assessment to score your response found at the bottom of the
assignment.

1. What are the auditor's responsibilities to detect fraud?

The auditor’s main responsibility is to audit and review the financial statements of the
company in accordance with the applicable accounting standards. In this case, the auditor
might detect some fraudulent activities regarding the financial operations of the company.
The financial statements might show discrepancies which could relate to fraud during the
audit process. Therefore, detecting fraud inside the company is part of the audit process of
the auditor. Basically, it is the auditor’s responsibility to detect fraud. For instance, it is the
responsibility of the auditor to collect financial information needed in order to assess and
identify if there are discrepancies and misrepresentation due to fraud. After assessing the
information gathered, it is the auditor’s responsibility to evaluate the operations of the
company in order to detect if there is actually fraudulent activities established inside the
company. Responding to the results obtained from the assessment and evaluation of the
company is last step in the audit process wherein the auditor is responsible to express
his/her opinion regarding on what he/she have gathered during the audit process.
2. Describe the industry conditions that can lead to financial statement fraud.
Financial statement fraud pertains to the misrepresentation of the managers of its financial
statements in the company. This is usually committed by the managers in order to have a
positive feedback on the financial statement audit prepared by the auditor. Hence, the
prevalence of financial statement fraud within the company would cause a serious problem
in the economy. It would have a great impact on the economic growth and development of
the country wherein it will destroy the image of the nation due to fraudulent activities.
Moreover, it would also worsen the status of the economy because of the eradication of the
business activities within the country due to fraud. Because of this, the reliability of financial
information in the market and economy would decline. As a summary, financial statement
fraud give rise to different industry conditions. It would greatly affects the future of the
economy of a country. Therefore, any acts of fraud should not be acceptable by any means.

3. Identify the elements and sub-elements of the fraud triangle.

There are three key elements of the fraud triangle, namely, opportunity, motivation, and
rationalization. The first element is opportunity. One can commit fraud when there is an
opportunity. When there is an open access of information inside the company, there is more
control on the operations of the company. Because of this, the employees may commit and
conceal fraud. The second element is motivation. This element refers to the needs felt by a
person. Hence, a person commits fraud in order to gain something. The third element is
rationalization which is related to ethics. When a person thinks that committing fraud is
acceptable, he/she may establish this kind of behavior. Therefore, a person is convinced
that committing fraud is a tolerable act. On the other hand, there are also sub-elements of
the fraud triangle which are under the element of motivation. These are pressure and
incentive. The first sub-element is pressure. When there is a pressure on the person such
as financial problem, he/she may be compelled to do fraud. Thus, pressure provides
motivation to persons to commit fraud. The second sub-element is incentive. This refers to
the circumstances experienced by a person wherein he/she will commit fraud in order to
acquire his/her wants.