With the use of suitable examples, explain the following; i. Errors ii. Irregularities iii. Frauds November 2013 Question Seven A

      

With the use of suitable examples, explain the following;
i. Errors
ii. Irregularities
iii. Frauds November 2013 Question Seven A

  

Answers


Kavungya
i) An error can be considered to be an unintentional mistake. Thus. a transactional
amount as a documents may read 1,2,3,4,5 Yet on recording that transaction into the
related day book_ a clerk may pick and enter the amount as 1,2,3.5 unintentionally.
Thus, the records will contain an error. In preparing a trial balance, the clerk may enter
a balance on the debt side yet it is a credit balance unintentionally.
ii) What can happen accidentally can also happen by design. Thus, the clerk mentioned in
above (i) may deliberately record the transaction mentioned as 1,235 instead of
12,345. When it is such a deliberate act than it becomes an irregularity and not an error
iii) An irregularity becomes a fraud when it involves criminal deception that is seeking
unfair financial advantages. Thus when directors deliberately overvalue the stocks at
the period end to increase profits and therefore their performance based bonus, then an
irregularity has become a fraud.
Kavungya answered the question on May 14, 2019 at 13:16


Next: Propose three ways in which a company might prevent or minimise accounting errors.
Previous: List the circumstances that indicate the presence of errors, irregularities and frauds in an entity

View More ATD Auditing Questions and Answers | Return to Questions Index


Exams With Marking Schemes

Related Questions