Fraud
audit代写 Over the passage of years a number of fraud cases have surfaced where it has been determined that the auditors were fooled by…
Introduction
Over the passage of years a number of fraud cases have surfaced where it has been determined that the auditors were fooled by the company representatives or their finance department, simply because they were that good. And so rose the opinion that fraudulent practices can be made possible, when the auditors are fooled into believing that the company’s practices are all legit and no employee from that company has gotten involved in malpractices.
However, after numerous cases, that shook the corporate world, the government introduced tougher security checks and measures that aids the auditor in determining how well the company has employed its policies. The Sarbanes Oxley act was introduced to address the concerns regarding the increase in fraudulent activities. It was introduced in 2002, to include higher standard for corporate accountability and governance. Along with this it also created a tighter framework for companies to be transparent in their workings and help in developing an independent framework that regulated the accounting profession. It was also intended to enhance and improve the quality and transparency of the financial reports, while introducing severe and stringent civil and criminal penalties for those corporate personnel involved in malpractice, while at the same time providing new protections to whistle blowers.
However, even after all that, companies find ways to commit frauds. In this paper we will discuss how auditors can be fooled by a company, and what steps any individual in the finance department can take to fool the auditors.
Situation audit代写
Mr. Andrews is the finance manager of ABC advertising agency, and the company will be having its audit in the coming month. However, with the number of clients declining due to one reason or another, the company is not performing well. The company is owned by a large conglomerate of group companies, having access to huge funds that can keep the company rolling for many years.
In order to embezzle money from the company, Mr. Andrews has come up with a plan. Following are some of the ways in which he can fool the auditors without getting caught and embezzle the money he wishes to take.
Mr. Andrews can easily embezzle funds from ABC Advertising Agency but he has to take into account certain factors to fool the auditors. Companies usually perform audit to find any aberration in their accounts (Fraud Conference, 2012), but planning everything ahead can give Mr. Andrews the advantage to fool the auditors and he can easily embezzle funds.
Use key accounts
To hide his fraud, Mr. Andrews can utilize different types of key accounts. There are accounts that can fall under the categories of “miscellaneous” or “supplies” where Mr. Andrews can store low-dollar transactions of high-volume. According to Minnesota Society for CPAs, it is difficult for the auditors to verify or audit such accounts due to the transaction volume. Moreover, account types which auditors cannot understand like warranty reserve, or research and development are a good place to hide the money trail and auditors cannot really find any problem in such accounts.
Moreover, in his embezzlement scheme Mr. Andrews can use the account types that warrant the utilization of estimates and judgment of management, are the perfect place to hide fraud. Moreover, such account types will also enable Mr. Andrews to fool the auditors as they will have insufficient knowledge about such account types. Moreover, estimates generally remain unchallenged by the auditors.
Understand the pattern audit代写
Usually, auditors take samples of transactions to test their accuracy. The results from sample testing are then generalized on the financial statements as well as their overall accuracy. Therefore, Mr. Andrews should understand the patterns that the auditor follow in his company. He needs to identify the types of transactions that are generally tested by the auditors and make sure to avoid hiding frauds in those transactions. Practically, it is impossible for auditors to go through every transaction and thus will be like finding a needle in a haystack. The probability of getting caught for Mr. Andrews is already very low, which can be further minimized by hiding the fraud in those transactions which auditors don’t test.
The effectiveness of audit testing has gone down due to the fact that auditors generally repeat their behavior every year. Therefore, it is necessary for Mr. Andrews to plan according to the auditors’ behavior. For instance, if ABC Advertising Company’s auditors test miscellaneous every year, then despite being a lucrative account type to hide fraud, Mr. Andrews should avoid hiding fraud in that account. It is important for Mr. Andrews to plan ahead and avoid risky account types. Moreover, Mr. Andrews should also avoid scrutiny by booking entries in a particular way. After learning which site is more likely to be visited by the auditors, Mr. Andrews can also move inventory from one location to another. Moreover, Mr. Andrews need to be ready for any scrutiny and should also keep false documentation ready in case if someone asks. This will help in fooling the auditors effectively.
Appear conservative
One of the most fundamental principles of accounting is conservatism. Moreover, Mr. Andrews should make the auditors believe that their company is very conservative in handling and maintaining accounts, because then the auditors will not scrutinize the numbers as they should have been. Mr. Andrews should tell the auditors what they want to hear and pretend to be conservative, because it will assist in fooling the auditors and the audit can be completed without any detection of fraud.
Paint a very attractive picture
Mr. Andrews should apply the earnings management technique and produce financial statements in a way that will show the auditors that the company is doing really well. This technique is mostly considered as a gray area, however, some authors have termed it fraud (Occupational Fraud and Abuse, 2012). To do this, Mr. Andrews should: anticipate activities and book its fictitious sales in advance, resort to round-tripping, recognize early revenues, get involved in channel stuffing, or not book accruals or expenses. These practices will make it difficult for the auditors to detect fraud and Mr. Andrews can easily embezzle needs.
Identify auditors with less experience
In the field of auditing, like in every other field, for the bulk field work auditors rely on inexperienced auditors. Since auditing firms also need to control the cost and this practice helps them make profit, but it will offer Mr. Andrews the opportunity to exploit them. Inexperienced auditors are either reluctant to ask difficult questions or don’t know which question to ask (Fraud Conference, 2012). Mr. Andrews can exploit this attitude of theirs and should manipulate them by leading them to believe that everything with the accounts of the company are fine. Inexperienced auditors take time to make sense of financial statements and business activities in the real world settings. Mostly, these are the people who have limited or no knowledge of fraud schemes, therefore, Mr. Andrews can easily exploit their lack of experience and can use it for his advantage.
Social engineering audit代写
Mr. Andrews should use social engineering by appearing more cooperative, and showing the willingness to work with them. Mr. Andrews should as mentioned above tell the auditors what they want to hear. According to the 2012 report on Occupational Fraud and Abuse, auditors’ tend to favor those employees who cooperate with them at every step. Therefore, Mr. Andrews should cooperate with the auditors but also make adjustments for them. Using this social engineering technique, Mr. Andrews can continue to embezzle funds without getting caught.
Conclusion
The auditor’s responsibility is to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.” (Fraud Conference, 2015) However, there are still fundamental flaws in the reporting system due to which the external audits fail to identify the many ways in which the money has been embezzled. According to a report published by the organizers of Fraud conference on Occupational Fraud and Abuse in 2012, auditors are only able to detect 3.3% of fraudulent activities undertaken by any organization. The rest of the cases have either been unidentified or the auditors haven’t been able to prevent, however, there is no documentation regarding the number of embezzlements or frauds that have been prevented by auditors.
Some of the reasons why this has been the case is because the entire process is too complex, making it difficult for the auditor to identify and trace the roots of the fraudulent activity. It also occurs due to restricted contact with the staff members and due to artificial time pressures or bullying by the management. Due to these reasons, auditors find it difficult to carry out their responsibilities in a proficient manner, and eventually it leads up , to more and more problems for them, until eventually they give out a synopsis in which they have been fooled by the people committing fraud.
References audit代写
Lucian Vasiua , Matthew Warrenb and David Mackaya, Defining Fraud: Issues for Organizations from an Information Systems Perspective, retrieved 4-5-18,
http://www.pacis-net.org/file/2003/papers/is-strategy/175.pdf
How the Fraudsters Fool the Auditors, retrieved 4-5-18 from;
Auditing for Fraud Detection, retrieved 4-5-18;
http://www.mypescpe.com/!PDFdocs/5700BTEXT.PDF
