AN EVALUATION OF FORENSIC ACCOUNTANTS TO PLANNING MANAGEMENT FRAUD RISK DETECTION PROCEDURES ABSTRACT
The study of the evaluation of Forensic Accountants to planning management fraud risk detection procedures aimed at investigating the relative merits of involving Forensic Accountants during the planning stage of developing an audit plan that will effectively identify Management fraud. Both primary and secondary sources of data were used for the study. Thirty five copies questionnaire were distributed to Accountants, in Kogi State, out of which 31 were filled and returned. Simple percentages mean and standard deviation were used to quantify the height of the variable. Multivariate Analysis of Variance (MANOVA) and Analysis of Variance (ANOVA) were used for the comparison of the study with Asare and Wright (2004) study. The study found out that, Forensic Accountants effectively modify the extent and nature of audit test when the risk of Management fraud is high, Forensic Accountants propose unique procedures that are not proposed by auditors when the risk of Management fraud is high, Forensic Accountants can make to the effectiveness of an audit plan when the risk of Management fraud is high, involving Forensic Accountants in the risk of Management fraud assessment process leads to better results than simply consulting them. The study recommended that Forensic Accountants should be involved in the planning stage of an audit, before and after the auditor has identified Management fraud risk factors. There is need for more training and accreditation of Forensic Accountants. Keywords: forensic accountants, planning, management fraud, risk detection, investigating Introduction
Management fraud is the “deliberate fraud committed by Management that injures investors and creditors through materially misleading Financial Statements” (Elliot and Willingham 1980, Apostolou, et al, 2000). The ability of an auditor to make an accurate assessment of Management Fraud Risk is crucial to the initial assessment of risk in an audit engagement (Hansen and Klamm 2004). If this assessment is incorrect, the planned audit procedures may be inappropriate or insufficient, and this in turn, may reduce the reliability of the Financial Statements and increase the auditor’s exposure to litigation and unfavorable outcomes (Palmrose, 1987). When designing audit procedures to reduce the risk of not detecting a material misstatement in the Financial Statements of an entity, an auditor is required by professional standards to use professional skepticism, to be alert to evidence, not withstanding prior experience with the client’s Management, and to be alert to factors that increase the possibility of Management Fraud (Hansen and Klamm, 2004). However, only seven percent of the audit partners experienced five or more material Management Frauds within their careers (Loebbecke, et al 1989), suggesting that auditor’ experience with material Management Fraud is limited. One way that auditor can compensate for their limited exposure to fraud is by consulting with fraud experts (Loebbecke, et al 1989). Asare and Wright (2004) conducted a study in which 69 experienced auditors were provided with a case (based on an SEC enforcement case) and asked to assess the risk of fraud, review and update a standard audit programme for the revenue cycle, and provide an opinion on the necessity of conferring with a risk management partner to finalize the proposed plan. Some of the auditors were given structured guidance in the form of standard risk checklists while other auditors were asked to make their assessments without such structured guidance. Asare and Wright found that the auditors who were provided with structured guidance underestimated the risk of fraud. In contrast, the auditors who were not provided with structured guidance assessed the fraud risk at higher levels and were more likely to refer the file to fraud experts. Nonetheless, the auditors who were not...
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