FRAUD RISK FACTOR
Fraud generally occurs when the three conditions beloe are present,
but they dramatically increase the financial risk:
1• Management or employees have an incentive or are under pressure;
2• Circumstances due to lack of assessment and mismanagement provide an opportunity for fraud to be perpetrated;
3• Individuals under stress, greed or
stupidity are able to rationalize
committing a fraudulent act.
Ineffective monitoring of management is result of the following:
Domination of management by a single person or small group without
having undergone special training.
Ineffective CEO / board or audit oversight over the financial reporting process.
Internal control components are deficient as a result of the following:
I. Inadequate monitoring of controls, including automated and controls over
interim financial reporting (where external reporting is required).
II. High turnover rates or employment of ineffective accounting, internal audit,
or information technology staff (when it's agreed, IIC brings the internal audit
and monitoring and perform these functions remote online).
III. Ineffective accounting and information systems, including situations involving reportable conditions.
