How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this...
Transcript of How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this...
![Page 1: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/1.jpg)
How Economic Trends Affect Audit Risk:
November 15, 2017
Presented by:
James Mihills, CPA
The Important Questions to Ask Right Now
![Page 2: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/2.jpg)
Disclaimer of Liability
Weaver provides the information in this presentation for general
guidance only, and it does not constitute the provision of legal
advice, tax advice, accounting services, investment advice or
professional consulting of any kind. The information included
herein should not be used as a substitute for consultation with
professional tax, accounting, legal or other competent advisers.
Before making any decision or taking any action, you shouldconsult a professional adviser who has been provided with all
pertinent facts relevant to your particular situation. The
information is provided "as is," with no assurance or guarantee of
completeness, accuracy or timeliness of the information, andwithout warranty of any kind, express or implied, including but
not limited to warranties of performance, merchantability and
fitness for a particular purpose.
2
![Page 3: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/3.jpg)
3
![Page 4: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/4.jpg)
4
Thinking Like Sherlock Holmes
To understand the story behind each mystery,
you must be able to read the narrative
correctly. Fine-tune your detective skills by
taking the time to analyze each room that
you walk into. Sherlock was brilliant at that. He
would see what was happening, observe
items around, and construct a narrative that
explained what had likely happened in the
past. See. Observe. Deduce.
North American Investigations blog post “7 Investigation Strategies from Sherlock Holmes,” 2013
![Page 5: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/5.jpg)
Reading the Economic Narrative
![Page 6: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/6.jpg)
6
Stock Market Value
0.00
5000.00
10000.00
15000.00
20000.00
25000.00
30000.00
![Page 7: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/7.jpg)
7
Fed Funds Rates
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
![Page 8: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/8.jpg)
8
Unemployment Rate
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
![Page 9: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/9.jpg)
9
Corporate Profits
0
500
1000
1500
2000
2500
![Page 10: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/10.jpg)
10
U.S. Personal Debt
0.00
500000.00
1000000.00
1500000.00
2000000.00
2500000.00
3000000.00
3500000.00
4000000.00
![Page 11: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/11.jpg)
11
Fed Financial Stress Index
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
![Page 12: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/12.jpg)
12
Bankruptcies
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
![Page 13: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/13.jpg)
13
HIG
HS
LOW
S Interest ratesat historic lows
Stock market value
at record high
Personal debtat record highs
Corporate profitsat record highs
Unemployment rate
near 10-year low
Financial stressat 25-year low
Bankruptciesnear 25-year low
![Page 14: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/14.jpg)
Economic
Fraud
Understandingthe Risks
Investment
![Page 15: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/15.jpg)
The risk that funding will not be
adequate to cover operating costs.
This risk also includes changes in outside
economic factors such as economic strength
and stability of significant and partner
vendors, structure, and policies outside the
organization’s immediate control.
Consider employment indicators, disposable
income factors, and consumer debt levels.
15
Economic Risk
![Page 16: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/16.jpg)
![Page 17: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/17.jpg)
The risk that the organization would make
unfavorable investment decisions—decisions that are not aligned with approved
investment strategies, or that the strategy inhibits
the organization from selecting the most
appropriate investments.
Includes investment selection and overall
compliance with established strategy.
Consider market volatility, investment selection
and management, diversification, and stock
market cycles.17
Investment Risk
![Page 18: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/18.jpg)
18
![Page 19: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/19.jpg)
The risk of the occurrence of illegal
acts characterized by deceit,
concealment, or violation of trust.
Risks associated with dollar volume, non-
conformance with ethical standards, and
complexity of operations make detection
more difficult.
19
Fraud Risks
![Page 20: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/20.jpg)
![Page 21: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/21.jpg)
Considering the Risks:
The Important Questions to Ask Right Now
![Page 22: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/22.jpg)
Are controls around granting
of credit to and monitoring
financial positions of
customers sufficient
considering high national
debt levels?
Have controls been established to monitor value
of underlying receivables
collateral for impact of
market fluctuation?
Are due diligence processes
adequate to measure
vendors’ ability to fulfill
contractual obligations considering potential
economic corrections?
The Important Questions to Ask Right
Now about:
Economic Risk
![Page 23: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/23.jpg)
Have controls been
established to monitor vendor
or supplier concentration risk?
Has the organization
established sufficient controls
for identifying adverse
financial and funding trends
on a timely basis, and have
action triggers been
established?
Do the organization’s credit
and financial monitoring
processes adequately
consider the possibility of
inflated consumer confidence
indicated by low rates of
financial stress combined with
high rates of debt?
The Important Questions to Ask Right
Now about:
Economic Risk
![Page 24: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/24.jpg)
Have controls been
established to assure that
investments made by
organization are consistent
with strategic objectives,
policy, and regulatory
parameters?
Are controls to assure
adequate diversification of
organization investments
sufficient?
Are controls to prevent the
undue pursuit of yield
sufficient given the
prolonged low interest rate cycle?
The Important Questions to Ask Right
Now about:
Investment Risk
![Page 25: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/25.jpg)
Has the organization
established controls to
assure that investment
decisions are made only
by qualified individuals?
Is the organization
conducting “what if”
modeling to consider the
impact of higher interest
rates or market
corrections?
Have controls been
established to monitor
impairment and valuation
decline in a downturn?
The Important Questions to Ask Right
Now about:
Investment Risk
![Page 26: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/26.jpg)
Given record stock market
value and corporate profits,
are controls over financial
reporting sufficient to assure
that competitive pressures do
not exert influence over
reporting decisions?
Are underwriting controls
sufficient for detecting
fraudulent documentation in
credit requests?
Has the organization
established sufficient controls
for detecting fraudulent
employment documentation given low unemployment
levels?
The Important Questions to Ask Right
Now about:
Fraud Risk
![Page 27: How Economic Trends Affect Audit Risk - · PDF fileWeaver provides the information in this presentation for general ... tax advice, accounting services, investment advice or ... Fine-tune](https://reader034.fdocuments.us/reader034/viewer/2022051722/5a9f8b477f8b9a89178cdd37/html5/thumbnails/27.jpg)
Are controls at risk of being
relaxed due to strong
profitability?
Are controls around the
establishment of new
vendors and disbursing of
funds sufficient to prevent employee fraud given record
debt levels?
Has the organization
established sufficient controls around employee expense
reports to assure that
reimbursements are made
only for valid business purposes?
The Important Questions to Ask Right
Now about:
Fraud Risk