Detecting Fraud in the Organization: An Internal Audit Perspective (original) (raw)

An Evaluation of Internal Auditor Responsibility for Fraud Detection

2008

All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means-electronic, mechanical, photocopying, recording, or otherwise-without prior written permission of the publisher. The IIARF publishes this document for informational and educational purposes. This document is intended to provide information, but is not a substitute for legal or accounting advice. The IIARF does not provide such advice and makes no warranty as to any legal or accounting results through its publication of this document. When legal or accounting issues arise, professional assistance should be sought and retained. The Institute of Internal Auditors' (IIA) International Professional Practices Framework for Internal Auditing (IPPF) comprises the full range of existing and developing practice guidance for the profession. The IPPF provides guidance to internal auditors globally and paves the way to world-class internal auditing. The mission of The IIARF is to expand knowledge and understanding of internal auditing by providing relevant research and educational products to advance the profession globally. The IIA and The IIARF work in partnership with researchers from around the globe who conduct valuable studies on critical issues affecting today's business world. Much of the content presented in their final reports is a result of IIARF-funded research and prepared as a service to The Foundation and the internal audit profession. Expressed opinions, interpretations, or points of view represent a consensus of the researchers and do not necessarily reflect or represent the official position or policies of The IIA or The IIARF.

Internal Auditors and the Prevention and Detection of Computer Fraud

Journal of Information Technology, 1989

This study examines the involvement and attitudes of internal auditors to the prevention and detection of computer fraud. This approach differs from previous research which has concentrated on learning from frauds which have occurred. The main enquiry was by means of a questionnaire sent to members of the Institute of Internal Auditors. Verification and additional information was forthcoming by visiting some respondents. Almost a fifth of internal audit departments reported that they had no specific responsibility for either prevention or detection of computer fraud. It was clear that where responsibility was acknowledged, it is generally on an informal basis or is self imposed. Internal auditors reported that most reliance was placed on computer assisted tools and manual techniques like input/ output reconciliation for detection of computer fraud. Few of the organisations surveyed had any laid down guidelines what to do in the case of a fraud discovery. Where guidelines did exist they called for dismissal and prosecution. In smaller firms, external auditors have a larger role in the prevention and detection of computer fraud than in larger firms. Opinion on the prevention and detection of computer fraud included the view that as network systems become more common, so detection and prevention will become more difficult. In addition it was claimed that management did not appreciate the level of the threat. Internal auditors feel that they have a role to play, but highlighted the fact that there is a shortage of staff with the requisite skills.

Determinants of Auditor's Ability to Detect Fraud: Internal and External Factors

International Journal of Science, Technology & Management

Fraud cases that occur in Indonesia have fluctuated every year and in 2020 the number of state losses due to fraud is the largest in the last five years. The purpose of this study was to determine the effect of internal factors (experience and professional skepticism) and external (whistleblowing and time budget pressure) on the ability of auditors to detect fraud. Sampling using a survey method in the form of a questionnaire given to respondents, namely internal auditors the inspectorate and produced as many as 55 samples. Data testing was carried out by multiple regression testing using the SPSS version 23 program. The results showed that internal factors consisting of experience and professional skepticism and external factors, namely whistleblowing, had a positive effect on the ability of auditors to detect fraud. Meanwhile, time budget pressure does not prove to have an effect on auditors' ability to detect fraud.

Internal Auditors Speak Out on Controlling Employee Fraud

Research on Professional Responsibility and Ethics in Accounting, 2011

The purpose of this chapter is to investigate what internal auditors see as a need for improvement regarding current business risk practices for controlling employee fraud. A survey of internal auditors compares perceptions of current versus desired situations in regard to six common practices of employee fraud risk management: training in fraud risk management, understanding how job procedures are designed to manage fraud risks, recognizing basic indicators of fraud, providing appropriate employee compensation incentives, reporting suspicions of fraud, and background verification of job applicants. Comparisons for each practice are made between the United States and Canada.The main finding is that the largest weakness in the employee fraud risk management practices relates to providing employees with training in their risk management programs. Seemingly related deficiencies are also indicated in both employee understanding of how their job procedures are designed to manage fraud risks and the ability of employees to recognize basic indicators of fraud. No measure of fraud prevention is more important than those involving the employees who actually conduct the affairs of an organization. The identification and ranking of gaps in employee fraud

The Role of the Auditor in the Prevention and Detection of Business Fraud: SAS No. 82

The cost of fraud to business in 1996 was six percent of annual revenue. Everyone is victimized by high product costs and lower corporate profits. When fraud is detected within a business, there is usually shock and disbelief that a trusted employee who resembles the "person next door" could have done what they are accused of. In light of the cost and characteristics of offenders, it is important to develop strategies to prevent or detect business fraud. In light of heightened public expectations and new expectations for auditors following the savings and loans scandals, this paper asks what the responsibilities are of external auditors, internal auditors, and management.

The Role of Internal Audit in Fraud Prevention and Detection

Procedia Economics and Finance, 2014

This article aims to not just briefly describe the role of the internal audit in the detection of possible frauds, but also to highlight its importance in preventing the commission of frauds in any economic entity. Moreover, the analysis intends to especially point out the advantages that an internal audit can offer to the management of an economic entity and its partners, and to the society as a whole as well. Starting from the premise that auditors are not the adversaries of an entity, one should remember that: the internal audit is a function of assistance offered to the leadership of that entity in order for them to better manage their activities; it expresses judgments on all decisions taken by the leadership that ensure the normal and efficient functioning of its activities; and its objective is to create added value.

Auditing and Fraud Control in Corporate Organisations

2018

This research work assessed the relationship between auditing and fraud control in corporate organizations and also assessed the most effective between internal and external auditing and forensic auditing as it regards fraud unearthing. The quasi experimental research design was employed in this work. The primary data were collected from respondents using the questionnaire. The data collected was then subjected to analysis. Three hypotheses were formulated and the Pearson product moment correlation coefficient was used in testing Ho 1 and Ho 2 while the chi-square was used in testing Ho 3. From the results, we found out that significant relationship exist between the dimensions of auditing (traditional auditing and forensic auditing) and fraud control and we also find out that forensic auditing is more effective than internal and external auditing in unearthing fraud. We then recommended that traditional auditing should be strengthened by training and retraining of the staff, expanding the scope of the work of traditional auditors to cover fraud detection, employment of forensic auditors in corporate organisations and constant training of such staff to be up to date with modern technology and sophisticated ways of committing fraud and their antidotes and that forensic auditors should be included during statutory auditing. We then concluded that there is an existence of positive and significant relationship between auditing and fraud control, that is, increase in auditing will lead to increase in fraud control.

Determinant Factors Affecting the Ability of External Auditor to Detect Fraud

2020

This study aims to provide empirical evidence on the factors that affect Jakarta auditor's fraud detection ability. The factors are auditor tenure, fraud detection experience, level of education, fraud training, and professional skepticism. This study is hypothesis-testing research; Respondents are 120 auditors from seven public accounting firms in Jakarta who participated in this study, thought a questionnaire. Data collected is done during April 2015 by visiting the public accounting firm that has been willing to participate in this study. The type of data used is primary data and is a cross-section; data is collected only once. The conclusion of the study is that auditor tenure, and fraud training does not affect the ability to detect fraud. While fraud detection experience, the auditor's level of education and professional skepticism positively influence fraud detection capability. Limitations, suggestions, and research implications hare described at the end of this report.

Accountants' perceptions regarding fraud detection and prevention methods

Managerial Auditing Journal, 2006

PurposeThe purpose of this study is to examine the extent to which accountants, internal auditors, and certified fraud examiners use fraud prevention and detection methods, and their perceptions regarding the effectiveness of these methods.Design/methodology/approachA survey was administered to 86 accountants, internal auditors and certified fraud examiners.FindingsThe results indicate that firewalls, virus and password protection, and internal control review and improvement are quite commonly used to combat fraud. However, discovery sampling, data mining, forensic accountants, and digital analysis software are not often used, despite receiving high ratings of effectiveness. In particular, organizational use of forensic accountants and digital analysis were the least often used of any anti‐fraud method but had the highest mean effectiveness ratings. The lack of use of these highly effective methods may be driven by lack of firm resources.Practical implicationsOrganizations should co...