Reference no: EM132949968

Question - The most common attempt used by the sample companies was to overstate their reported revenue by recognising fictitious sales from bogus customers. Sample companies who attempted this initial manipulation often followed with consequential manipulations and in some cases also embarked on masking manipulations. Sensible motives for the sample companies to manipulate their financial statements include capital raising exercises, closeness to defaulting on debt repayments and sustaining equity overvaluations....'

Given of the findings shown above, one of the major concerns for the regulators is that whether the auditors have been sufficiently sceptical in recent times. Both internal and external auditors should play an important role in addressing the risk of fraudulent financial reporting in the business organization(s).

Evaluate and compare internal audit and external audit in the context of ISA 240 The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements.