Write Up on Detection of Fraud

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DETECTION OF FRAUD
(A Study on the Relations of Fraud Detection, Redress and Reporting by Auditors, Protecting against Fraud Detection: the Case of Auditors and the Effect of Auditors Personality) Prepared by:-
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PREFACE

The objective of this assignment is to promote critical thinking on to what extent auditors comply with auditing standards once they encounter fraud and auditors’ compliance on managing fraud, the debate on auditors’ negligence when it comes to fraud and the side effects of fraud detection towards personality. A selection of three articles that were chosen in identifying and subsequently analyse the impact of fraud towards an individual, group or within an organisation. The three articles are:- * Protecting against Detection: The Case of Auditors and Fraud? * Fraud detection, redress and reporting by auditors,

* Fraud Risk Assessment and Detection of Fraud: The Moderating Effect of Personality. The objective for this assignment is to aim on the relationship between the auditors’ ability to assess fraud risk and the ability to detect the likelihood of fraud. Also, this study considers the overall trend of development and the prospects for future changes regarding the auditor’s fraud detection responsibilities.

INTRODUCTION

Most of the individuals feel that auditors fail to comply with some important elements of fraud standards. Fraud represents a significant and challenging issue throughout the accounting profession practically almost everywhere in the world. Dramatic financial scandals often takes place as soon after companies received apparent “green light” from their auditors have kept the issue of fraud and the responsibility for its detection closely relate to auditors in particular. Auditors are required by the auditing standards to provide reasonable assurance that the financial statements are free from any misstatements. Inability to accomplish so particularly fraud may expose the auditors to litigation. The detection of fraud is the most important portion of the auditor’s duties. Therefore, auditors should assiduously cultivate this branch of their activities. (Dicksee, 1990). Whenever there is a sudden alarm and collapse within the company, people tend to assume that the auditors negligently failed to spot something was wrong and the auditors failed to solve the issue. Detection of fraud is no longer the principal audit objective but rather the subsidiary to the determination of the truth and fairness of corporate financial statements. This development in stated audit objectives is often portrayed as a process of natural, uncontroversial evolution in which professional guidance came to meet changing public expectations and circumstances (Tricker, 1982). The growth in the size of business, the assumption of corporate management of a greater responsibility for fraud detection and a broad acceptance of the increasingly uneconomic nature of audit-based fraud detection are usually identified as the main causes of the changing nature of audit responsibilities (CACA, 1986).

CENTRAL ISSUES & PROBLEMS

When it comes to redress, it relates to the auditee taking measures situations where fraud has been detected. Given the existing standards on the role of auditors in fraud situations, the existence performance gap in this context can be due to several factors, including the lack of knowledge or competence on how to act once corporate fraud is detected, lack of care in following protocol or the lack of independence of the auditor possibly because conflicting of interest. Given the sensitive nature of fraud reporting towards the society’s expectations, compliance with fraud standards is crucial nowadays. 56% from recent surveys said that expectations of auditors rely on the auditor’s duty to detect fraud, while 42% believed that it is the responsibility to search actively for fraud (Steen, 1990). The...
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