Презентация на тему "Fraudi. types of fraud"

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  Fraud Subjects of financial monitoring Transactions with money and (or) other property, subject to financial monitoring Signs of suspicious transaction criteria Types of fraud Those responsible for detecting and preventing fraud Journal entries testing (JET) Anti-money laundering

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  FraudI. Types of fraud

  Fraud is an intentional act by one or more individuals among management, those charged with governance, employees or third parties involving the use of deception to obtain an unjust or illegal advantage. Fraud risk factors are events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Fraud is a wide legal concept, but the auditor's main concern is with fraud that causes a material misstatement in financial statements. 2 types of fraud causing material misstatements in FS Fraudulent financial reporting Misappropriation of assets

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  This may include: Manipulation, falsification or alteration of accounting records/supporting documents Misrepresentation (or omission) of events or transactions in the financial statements Intentional misapplication of accounting principles Fraudulent financial reporting involves intentional misstatements, including omissions of amounts or disclosures in financial statements, to deceive financial statement users. Misappropriation of assets involves the theft of an entity's assets and is often perpetrated by employees in relatively small and immaterial amounts. However, it can also involve management who are usually more capable of disguising or concealing misappropriations in ways that are difficult to detect. Such fraud may be carried out by overriding controls that would otherwise appear to be operating effectively, for example, by recording fictitious journal entries or improperly adjusting assumptions or estimates used in financial reporting.

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  FraudII. Those responsible for detecting and preventing of fraud

  Who are responsible for detecting and preventing of fraud??? Those charged with governance (TCWG) Management Implementation of controls to reduce opportunities for fraud to take place Persuade individuals not to commit fraud because of the likelihood of detection and punishment Creation of culture of honesty and ethical behavior TCWG should consider the potential for override of controls or other inappropriate influence over the financial reporting process, such as efforts by management to manage earnings in order to influence the perceptions of analysts as to the entity’s performance and profitability.

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  Are auditors responsible for detecting and preventing of fraud? NO Auditors responsibilities The auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. The risk of not detecting a material misstatement from fraud is higher than from error because of the following reasons: Fraud may involve sophisticated schemes designed to conceal it. Fraud may be perpetrated by individuals in collusion (сговор). Management fraud is harder to detect because management is in a position to manipulate accounting records or override control procedures.

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  FraudIII. Journal entries testing (JET)

  Auditor’s consideration of the risks of material misstatement associated with inappropriate override of controls over journal entries is important since automated processes and controls may reduce the risk of inadvertent error but do not overcome the risk that individuals may inappropriately override such automated processes, for example, by changing the amounts being automatically passed to the general ledger or to the financial reporting system. Furthermore, where IT is used to transfer information automatically, there may be little or no visible evidence of such intervention in the information systems. Material misstatement of financial statements due to fraud often involve the manipulation of the financial reporting process by recording inappropriate or unauthorized journal entries. This may occur throughout the year or at period end, or by management making adjustments to amounts reported in the financial statements that are not reflected in journal entries, such as through consolidating adjustments and reclassifications.

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  When identifying and selecting journal entries and other adjustments for testing and determining the appropriate method of examining the underlying support for the items selected, the following matters are of relevance: The assessment of the risks of material misstatement due to fraud Fraud may assist the auditor to identify specific classes of journal entries and other adjustments for testing Controls that have been implemented over journal entries and other adjustments effective controls over the preparation and posting of journal entries and other adjustments may reduce the extent of substantive testing The entity’s financial reporting process and the nature of evidence that can be obtained routine processing of transactions involves a combination of manual and automated steps and procedures The characteristics of fraudulent journal entries or other adjustments inappropriate journal entries or other adjustments often have unique identifying characteristics The nature and complexity of the accounts Journal entries or other adjustments processed outside the normal course of business non standard journal entries may not be subject to the same level of internal control as those journal entries used on a recurring basis to record transactions such as monthly sales, purchases, etc.

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  Main procedures performed in JET: Entries ending in round numbers Entries with unusual posting date or times Entries with no description Entries associated with unusual or non-routine events Entries that affect earnings Preparers who recorded few entries Entries prepared by senior management or IT staff Entries with no preparer or nonsensical user names and entries prepared by persons who ordinarily would not be expected to prepare entries

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  IMPORTANT!!! All selected transactions MUST HAVE notes Notes should be detailed with the reference to working paper where you have covered the risk Example: Note – Contribution to charter capital. Here, please give REFERENCE to Equity wp. In case of not performing one of the JET procedures listed in the previous slide (due to absence of some information, e.g. performer of transaction) you cannot miss the procedure at all, instead you MUST write the general note and write how you covered that risk or propose to include the identified issue into Management letter point (MLP)

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  Anti-money launderingI. Subjects of financial monitoring

  Money laundering is the process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean").  Most anti-money laundering laws openly conflate money laundering (which is concerned with source of funds) with terrorism financing (which is concerned with destination of funds) when regulating the financial system. The Financial Action Task Force (on Money Laundering) (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001 the purpose expanded to act on terrorism financing following the September 11 terrorist attack. It monitors countries' progress in implementing the FATF Recommendations by ‘peer reviews’ (‘mutual evaluations’) of member countries. The FATF Secretariat is housed at the headquarters of the OECD in Paris.

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  Закон Республики Казахстан “О противодействии легализации (отмыванию) доходов, полученных преступным путем, и финансированию терроризма” Дата вступления Закона в силу – 28 августа 2009 года Комитет по финансовому мониторингу Министерства финансов Республики Казахстан http://www.kfm.gov.kz/ru/help-sfm/sfm-rules/ Money laundering is the process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean").  Most anti-money laundering laws openly conflate money laundering (which is concerned with source of funds) with terrorism financing (which is concerned with destination of funds) when regulating the financial system.

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  Subjects of financial monitoring include: banks, organizations engaged in certain types of banking operations, except for the operator interbank money transfer system; exchanges; insurance (reinsurance) organizations, insurance brokers; a single accumulative pension fund and voluntary pension savings funds; professional participants of the securities market, central depository; notaries performing notarial actions with money and (or) other property; lawyers, other independent legal professionals - in cases where they are from or on behalf of a client engaged in operations with money and (or) other property accounting organizations and professional accountants, carries on business in the field of accounting, auditing organizations; organizers of gambling and lotteries; mail operators providing money transfer services; microfinance institutions; the operators of electronic money, than banks.

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  Anti-money launderingII. Transactions with money and (or) other property, subject to financial monitoring

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  Anti-money launderingIII. Signs of suspicious transaction criteria

  Признаки критериев подозрительной операции (вне зависимости от суммы транзакции): Совершение операции (сделки), не имеющей очевидногоэкономического смысла Совершение действий, направленных на уклонение от процедурфинансового мониторинга, предусмотренных Законом Совершение операции (сделки), имеющей основание полагать, чтоданная операция (сделка) направлена на финансирование терроризма и(или) экстремизма Совершение операции, по которой имеются основания полагать, чтоона направлена на обналичивание денег, полученных незаконным путем Операции, по которым получателем денег либо товаров (работ, услуг,охраняемой информации, исключительных прав на результатыинтеллектуальной деятельности, имущества, переданного вимущественный найм (аренду) является нерезидент, не являющийсястороной по договору, предусматривающему импорт (экспорт)резидентом товаров (работ, услуг, охраняемой информации,исключительных прав на результаты интеллектуальной деятельности,имущества, переданного в имущественный найм (аренду)