Fraud Auditing and Different Type of Fraud
Fraud Auditing and Different type of fraud
Introduction
Over the years, the role of auditors become increasingly important especially in a capitalist economy as the process of wealth creation and political stability depends heavily upon confidence in processes of accountability and how well the expected roles are being fulfilled. An auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing. The most frequently debated areas amongst auditors, politicians, media, regulators and the public is where the fraud is coming from and by whom. This disagreement has been especially tinted by the collapse of big corporations like Enron and WorldCom. The unforeseen fall of Enron and WorldCom traumatized the world as both of these companies received clean bills of health from their auditors immediately prior to their for bankruptcy.
Type of fraud
Fraud itself comprises a large variety of activities and includes bribery, political corruption, business and employee fraud, consumer theft; network hacking, bankruptcy and divorce fraud, and identity theft. Many find it helpful to separate between internal and external fraud. Internal fraud is usually found by internal auditors. In the Statement of Auditing Standards 99, it’s defines fraud as an intentional act that results in a material misstatement in financial statements. There are two types of fraud considered: misstatements arising from fraudulent financial reporting (e.g. falsification of accounting records) and misstatements arising from misappropriation of assets (e.g. theft of assets or fraudulent expenditures).
Examples of fraudulent financial reporting and Misappropriation of assets; * Fraudulent financial reporting. An example of fraudulent financial reporting is a company that ships customers’ goods that have not been ordered and then records the revenue as if it met all the criteria for revenue recognition. In
Introduction
Over the years, the role of auditors become increasingly important especially in a capitalist economy as the process of wealth creation and political stability depends heavily upon confidence in processes of accountability and how well the expected roles are being fulfilled. An auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing. The most frequently debated areas amongst auditors, politicians, media, regulators and the public is where the fraud is coming from and by whom. This disagreement has been especially tinted by the collapse of big corporations like Enron and WorldCom. The unforeseen fall of Enron and WorldCom traumatized the world as both of these companies received clean bills of health from their auditors immediately prior to their for bankruptcy.
Type of fraud
Fraud itself comprises a large variety of activities and includes bribery, political corruption, business and employee fraud, consumer theft; network hacking, bankruptcy and divorce fraud, and identity theft. Many find it helpful to separate between internal and external fraud. Internal fraud is usually found by internal auditors. In the Statement of Auditing Standards 99, it’s defines fraud as an intentional act that results in a material misstatement in financial statements. There are two types of fraud considered: misstatements arising from fraudulent financial reporting (e.g. falsification of accounting records) and misstatements arising from misappropriation of assets (e.g. theft of assets or fraudulent expenditures).
Examples of fraudulent financial reporting and Misappropriation of assets; * Fraudulent financial reporting. An example of fraudulent financial reporting is a company that ships customers’ goods that have not been ordered and then records the revenue as if it met all the criteria for revenue recognition. In
References: www.usdoj.gov/criminal/fraud.html. http://www.journalofaccountancy.com/Issues/1997/Apr/mancino.htm http://images.search.yahoo.com http://www.lacpa.org.lb http://www.theiia.org/guidance/standards-and-guidance/ippf/standards/full-standards/?i=8317 https://www.ocps.net/sb/internalaudit/Documents/Fraud.pdf Susan D. Battini, CPA, Annette K. Campbell, CPA and David A Vaudt, CPA, 2005, Auditing and Fraud Prevention for Cities