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Article
Publication date: 1 April 1996

Glen D. Moyes and Iftekhar Hasan

Investigates the relative importance of potential factors associated with the likelihood of detecting fraud during the audit of financial statements. Based on a survey of…

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5405

Abstract

Investigates the relative importance of potential factors associated with the likelihood of detecting fraud during the audit of financial statements. Based on a survey of 357 auditors, reveals auditing experience of the auditor and prior success of auditing organization in detecting fraud are constantly significant variables in detecting fraud for each audit cycle and combined cycle estimates. Certified public accountant certification, peer review, and organizational size have impact only on certain specific audit cycles. This study surveyed two types of auditor: first, certified public accountants specialized in auditing publicly held corporations (external); and second, government entities, and internal auditors specialized in auditing publicly held corporations (internal). The respondent auditors evaluated the degree of effectiveness of 218 auditing techniques in detecting fraud. These techniques were associated with four different audit cycles: acquisition and payment, inventory and warehousing, payroll and personnel and sales and collection.

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Managerial Auditing Journal, vol. 11 no. 3
Type: Research Article
ISSN: 0268-6902

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Book part
Publication date: 10 February 2020

Seval Kardeş Selimoğlu and Mehtap Altunel

Along with accounting scandals in the past, academics, researchers, and legislators have focused on fraud. The purpose of this study is to examine postgraduate and…

Abstract

Along with accounting scandals in the past, academics, researchers, and legislators have focused on fraud. The purpose of this study is to examine postgraduate and doctoral studies, articles, and books about forensic accounting and fraud audit published between the years 2008 and 2018 in Turkey. For this purpose, a total of 96 studies have been examined and 35 of these are master’s theses, 10 of them are PhD theses, 45 of them are articles, and six of them are books. These studies were presented in tables as classified. The studies examined in our research are summarized as year they were published, the author, and the scope of the topic and in terms of results. The conclusions of this study can be summarized as follows: (a) the majority of thesis published about forensic accounting and fraud audit are in 2011 and following years. In addition, most of the theses are focused on forensic accounting review rather than fraud audit. (b) Results in the articles reviewed are in the same direction with theses. (c) There are very few books about fraud audit and forensic accounting. One of them is related to fraud audit, while the rest of them are related to forensic accounting and forensic accounting profession. We suggest extending the scope of the study and making to other countries.

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Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Book part
Publication date: 18 January 2021

Rasha Kassem and Umut Turksen

The need for independent audit goes back to the agency theory, the theory of delegation of power and the issue of trust. Stakeholders delegate power to management to…

Abstract

The need for independent audit goes back to the agency theory, the theory of delegation of power and the issue of trust. Stakeholders delegate power to management to manage the business on their behalf, yet they face the risk of information asymmetry and management motivations to commit fraud. The main aim of having an independent auditor was therefore to reduce the risk of information asymmetry and fraudulent behaviour by management. Auditors are required by the International Auditing Standards to detect material fraud and error, and they are expected to have a duty of care for stakeholders. However, recently independent auditors, whether conducting private or public audit, have been scrutinised for failing to detect material fraud. There have been a lot of discussions in the literature about the role of private auditors in detecting fraud, but very little discussions about the role of public auditors in detecting fraud. This chapter will outline the difference between private audit and public audit; explain the legal liability of public auditors in relation to fraud detection; the role of public auditors in detecting fraud; and will critically review the root causes for auditors’ failure to detect fraud.

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Contemporary Issues in Public Sector Accounting and Auditing
Type: Book
ISBN: 978-1-83909-508-5

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Book part
Publication date: 10 February 2020

Burcu İşgüden Kılıç

Professionals who carry out the forensic accounting profession must have an extensive knowledge of accounting, as well as an effective knowledge of law, auditing, internal…

Abstract

Professionals who carry out the forensic accounting profession must have an extensive knowledge of accounting, as well as an effective knowledge of law, auditing, internal audit, business management, psychology, crime science, and, in particular, computer technologies. In today’s digital business environment, it has become difficult to identify fraudulent transactions with traditional methods. Developments in information (data) and information technology have helped increase anti-fraud control programs and fraud research opportunities. In particular, fraudulent financial reporting disrupts the reliability, accuracy, and efficiency of financial markets in terms of existence and continuity. The forensic accounting profession has been able to improve the effectiveness of inspections by using big data techniques, data analytics, and algorithms (Rezaee, Lo, Ha, & Suen, 2016; Seda & Kramer, 2014; Singleton & Singleton, 2010).

The aim of the author, in this chapter, is to evaluate the contribution of using big data techniques in forensic accounting applications and the skills that will be provided to students while integrating these techniques in forensic accounting trainings. For this purpose, studies on forensic accounting education and their applications were reviewed. In addition, opinions were evaluated by considering the relevant literature about the importance of big data, benefits of big data, use of big data techniques, and interest shown of them.

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Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Article
Publication date: 6 July 2015

Dominic Peltier-Rivest and Nicole Lanoue

The purpose of this paper is to analyze the effect of various internal controls (i.e. hotlines, regular ethics (fraud) training, surprise audits, internal and external…

Abstract

Purpose

The purpose of this paper is to analyze the effect of various internal controls (i.e. hotlines, regular ethics (fraud) training, surprise audits, internal and external audits and background checks) on reducing occupational fraud losses by victim organizations.

Design/methodology/approach

The paper, based on data from an occupational fraud report co-authored by the Association of Certified Fraud Examiners (ACFE) and Peltier-Rivest (2007), uses a multivariate regression analysis to analyze the effect of various internal controls on preventing fraud losses.

Findings

The authors’ analyses demonstrate that hotlines, regular ethics (fraud) training, surprise audits and internal audits all decrease fraud losses when used separately. However, hotlines and surprise audits are the only statistically significant controls when controlling for the potential correlation among all internal controls. Hotlines are associated with a reduction of 54 per cent in median fraud losses, while surprise audits cut median losses by 69 per cent.

Research limitations/implications

This study contributes to academia and the anti-fraud profession by assessing the statistical effect of six internal controls on preventing fraud losses, while controlling for the potential correlation among these controls.

Practical implications

This study discusses the relative benefits (loss savings) of various internal controls to organizations, governments, managers and anti-fraud professionals. This information may help determine investment priorities in the context of scarce resources.

Originality/value

This paper is based on proprietary data owned by the ACFE and is the first to analyze the statistical significance of various internal controls on the reduction of fraud losses in Canada.

Details

Journal of Financial Crime, vol. 22 no. 3
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 26 October 2017

Frank Kabuye, Stephen Korutaro Nkundabanyanga, Julius Opiso and Zulaika Nakabuye

The purpose of this paper is to study the relationship between internal audit organisational status, competencies, activities and fraud management. As a corollary, this…

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Abstract

Purpose

The purpose of this paper is to study the relationship between internal audit organisational status, competencies, activities and fraud management. As a corollary, this paper examines the contribution made by the internal audit organisational status, the internal audit competence and the internal audit activities on fraud management in financial services firms.

Design/methodology/approach

This study is cross-sectional and correlational, and it uses firm-level data that were collected by means of a questionnaire survey from a sample of 54 financial services firms in Kampala – Uganda.

Findings

Results suggest that the internal audit organisational status and the internal audit competence are significant predictors of fraud management. Contrary to previous thinking, internal audit activities do not significantly predict fraud management. Therefore, once internal auditors have appropriate status and are competent in an organisation, they are likely to perform activities that enhance fraud management.

Research limitations/implications

This study focuses on financial services firms in Uganda, and it is possible that these results are only applicable to the financial services sector. More research is therefore needed to further understand the contribution of the internal audit constructs on fraud management in other sectors such as the public sector.

Practical implications

The results are important for internal audit policy development, for example, in terms of prescribing the competences and reporting lines for the internal auditors to enhance fraud management in the financial services sector.

Originality/value

As far as the authors are aware, no research has hitherto been undertaken that investigates the individual contribution of internal audit organisation status, competence and its activities as internal audit constructs on fraud management.

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Managerial Auditing Journal, vol. 32 no. 9
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 12 October 2010

Harold Hassink, Roger Meuwissen and Laury Bollen

The primary research question of this study is to what extent auditors comply with auditing standards once they encounter fraud and whether compliance is associated with…

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10728

Abstract

Purpose

The primary research question of this study is to what extent auditors comply with auditing standards once they encounter fraud and whether compliance is associated with particular fraud characteristics (i.e. material versus immaterial fraud, management versus employee fraud, statutory versus voluntary audit and external versus internal fraud) as well as with auditor (experience) and audit firm characteristics (Big Four versus non‐Big Four). The study also aims to provide evidence on the role of auditors in redressing fraud. Redress refers to the auditee taking measures to nullify the consequences of the fraud, insofar as possible, and to prevent any recurrence of such fraud.

Design/methodology/approach

To gather data on the role of auditors in fraud cases, a survey was conducted among all audit partners of the top 30 Dutch audit firms. In total, 1,218 audit partners were selected and received a postal questionnaire. In total, 326 questionnaires were returned (27 per cent), of which 296 (24 per cent) were usable.

Findings

The results reveal that auditors fail to comply with some important elements of fraud standards. There are substantial differences among audit firms regarding compliance with the relevant auditing standards. Furthermore, auditors appear to encounter corporate fraud only incidentally. About half of the auditors believe they have a “significant” impact on redressing fraud.

Research limitations/implications

One of the main research findings is that it is difficult for individual auditors to build up expertise in fraud detection. There appears to be a need for specific training programs for auditors to help them to detect fraud, emphasizing the need for mandatory consultation with the technical department of the audit firm once “red flags” indicating fraud are found. Indeed, this need for change has been addressed by the Dutch professional accountancy body NIVRA as a direct result of the findings of this study.

Originality/value

This study extends existing research by investigating the compliance of auditors with fraud standards and it sheds light on the actual redress experiences of auditors. It focuses on the actions taken by auditors – or the lack thereof – in situations where auditors encounter fraud signals. The study indicates that in the absence of good oversight, auditors have mixed incentives when they are confronted with signals for fraud, resulting in actions that are not always in line with existing regulatory requirements.

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Managerial Auditing Journal, vol. 25 no. 9
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 29 June 2010

Philmore Alleyne, Nadini Persaud, Peter Alleyne, Dion Greenidge and Peter Sealy

The purpose of this paper is to explore perceptions of fraud detection techniques in the stock and warehouse cycle in Barbados.

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2977

Abstract

Purpose

The purpose of this paper is to explore perceptions of fraud detection techniques in the stock and warehouse cycle in Barbados.

Design/methodology/approach

The study uses a self‐administered questionnaire, adapted and modified from Owusu‐Ansah et al. The sample is comprised of 64 auditors. The study examines the perceived effectiveness of audit procedures, the influence of size of the audit firm, and the level of audit experience in the choice of specific audit procedures.

Findings

The study indicates that there is a moderate to high perceived effectiveness of standard audit procedures in the detection of fraud in the stock and warehousing cycle in Barbados and that the majority of the “more effective” audit procedures can be classified as field research techniques that are more direct in obtaining evidence. It is found that auditors from larger firms reported higher means for audit procedures. There are mixed findings with respect to the significant relationship between level of auditing experience of auditors and perceived effectiveness of fraud detection techniques. The study also indicates that males consistently rated the level of effectiveness of audit procedures higher than females.

Research limitations/implications

Due to the relatively small sample size, these findings should be interpreted with caution. Nonetheless, the findings of this study do indicate that auditing procedures in this developing country are on par with those of developed countries.

Practical implications

This paper serves to inform audit‐related policies and regulation on the potential threats within the stock and warehouse cycle.

Originality/value

This paper contributes to the limited body of research on fraud detection within the stock and warehouse cycle in small developing countries.

Details

Managerial Auditing Journal, vol. 25 no. 6
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 April 2005

R. Jayalakshmy, A. Seetharaman and Tan Wei Khong

To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity.

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Abstract

Purpose

To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity.

Design/methodology/approach

A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write‐ups in the business magazines on the fall of multinationals.

Findings

A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty‐first century, they should be willing to change their attitudes towards their clients. Professionalism should be in the forefront, and an overhaul in the concept of “true and fair” could probably be the solution to harmonisation of the economy.

Research limitations/implications

This paper lacks statistical data on the views of the authors. It is based purely on secondary data.

Practical implications

Provides awareness to the auditors, corporations and general public on the necessity to revamp the existing auditing practices. This can help the auditors not only to be professionals, but also to be seen as professionals.

Originality/value

This paper provides scope for research in this area to identify whether the overhaul concept is acceptable. If yes, what should the new concept be? If no, what is the solution to the existing public outcry?

Details

Managerial Auditing Journal, vol. 20 no. 3
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 February 1998

Rocco R. Vanasco

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and…

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24964

Abstract

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and detect fraud, domestically and abroad. Specifically, it focuses on the role played by the US Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the Institute of Internal Auditors (IIA), the Institute of Management Accountants (IMA), the Association of Certified Fraud Examiners (ACFE), the US Government Accounting Office (GAO), and other national and foreign professional associations, in promulgating auditing standards and procedures to prevent fraud in financial statements and other white‐collar crimes. It also examines several fraud cases and the impact of management and employee fraud on the various business sectors such as insurance, banking, health care, and manufacturing, as well as the role of management, the boards of directors, the audit committees, auditors, and fraud examiners and their liability in the fraud prevention and investigation.

Details

Managerial Auditing Journal, vol. 13 no. 1
Type: Research Article
ISSN: 0268-6902

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