Andy Wiltshire is the accounts payable manager of Homestead Property Ltd (HPL). Andy started with HPL as an accounts clerk and worked his way up to his current management position. He was promoted due to his dedication to the company and his reliability he often works evenings and weekends, rarely calls in sick, and he never takes vacations. Despite earning a good salary, Andy enjoys living large, and the majority of his earnings goes to pay for his luxury car and designer clothes. He finds himself living pay cheque to pay cheque and has no savings for retirement or emergency purposes. HPL had a long history of profitability and had established a bonus scheme to reward its employees when profit targets were made. However, at the end of 20X1, employees were shocked when HPL announced it had its worst year in the companys history. Its losses were significant and the company instituted significant lay-offs in an attempt to turn this situation around. The accounting departments staffing was reduced by 35%, and the remaining staff was asked to do more. Andy now found that not only is he managing an unhappy accounts payable group, he is also now signing cheques, processing payables, and reconciling the bank account. This meant Andy is required to work even more without any pay increase or bonus in sight. For the first time in his career at HPL, Andy is unhappy. While he is fearful of further lay-offs, he also feels unappreciated and after all of his hard work, he is unhappy he is being asked to do more. He is also very worried that if he himself was laid off, his prospects of getting a similar job were bleak as he did not have an accounting qualification and his age may be a liability.

Required: (a)Explain the external auditors responsibilities in relation to the prevention and detection of fraud and error. (2 marks) Discuss the incentives, opportunities, and rationalizations to commit fraud in this case. (8 marks