GAAP rules that will assist to determine the fraud in the key areas Research Paper

GAAP rules that will assist to determine the fraud in the key areas - Research Paper Example According to the research findings auditor has highlighted these major problems. †¢ Leases on technology assets seem inflated †¢ Understated of e Commerce state tax payment †¢ Fictitious employees receiving post-employment benefits †¢ Hiding cash in order to help in future quarters where earning do not meet analyst’s expectations †¢ Concealing inventory shrinkage because it seems low for the industry There are many GAAP rules that assist to determine if the fraud is taking place all these areas. International GAAP, ISA 240 the Auditor Responsibilities Relating to Fraud in an Audit of Financial Statements recognizes that the misstatement in the financial statement can arise from the either fraud and error. The distinguishing factor is whether the underlying action that resulted in the misstatement was intentional or unintentional. The above all situations are supposed to be a fraud because the audit team found all these activities as a fraud. In relation with IAS 240, the fraud is a criminal activity. In addition, it is not a role of the auditor to determine whether the fraud is has actually occurred. That is the responsibility of a country’s legal system. Auditor must only be aware of the impact of fraud on the accuracy of financial statements. The GAPP rules state that the auditor is responsible for obtaining reasonable assurance that the financial statements, taken as a whole, are free from material misstatements, whether fraud and error. ISA 315 identifying and assessing the risk of material misstatements state assist to determine the determine fraud in the above mentioned situation. The GAAP rules that assist to determine the fraud in above situations are mentioned below separately. Leases on technology assets seem inflated: Technological assets are treated as the major asset of the company. Inflated leases amount can manipulate the figures of assets in statement of financial position of the company easily. In the light of IAS 240, the Auditor Responsibilities Relating to Fraud in an Audit of Financial Statements, Fraudulent financial reporting techniques are treated as Fraud. These are the techniques that can misstate the accounts to make the company look better/worse than it actually is. In this situation the GAAP assist to determine the fraudulent situation in this scenario because it is the possibility that the management of the company want to manipulate the figures of assets to make up the statement of financial position. Understatement of e-Commerce state tax payment: Misrepresentation of tax payments can show the better profitability figures in statement of comprehensive income. According to GAAP, Auditor has the responsibility to assure the financial statements are presenting true and fair view. That’s why the GAAP assist to determine the fraud in this case because if this activity is not treated as fraud, then the auditor will not be able to give the reasonable assurance on the truth and fairness of financial statements of the company. Fictitious employees receiving post-employment benefits: IAS 200 overall objective of the independent auditor state that the auditor is responsible for providing â€Å"an opinion in whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework†. The company accounts can be manipulated in material manner by the technique to giving post engagement benefits to fictitious employees. In this case, it is responsibility of the auditor to treat this activity as fraud to fulfill his primary aim of the audit. Hiding cash in order to help in future quarters where earning do not meet