AUDITING FOR FRAUD
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Several scholars are of the opinion that the internal auditor should not be tasked with uncovering fraud. The internal auditor may find errors and mistakes throughout the company's operations and financial records. In particular they refer to the fraudulent transactions committed by top managers and company officers. To add to the complexity of the subject, they added, the internal auditor has no education in legal matters. In addition, expanding the American business in foreign countries will add more complexity to the subject matter from legal and cultural stand point.
Do you agree with their opinion? Why yes? Why not?
Should fraud be reported regardless to the amount involved? Why yes? Why not?
Do you propose another approach?
Should search for fraud be limited to top management actions? Should it cover across the board from the president of the company down to the janitor?
Should the fraud audit be conducted only when there is information indicating the presence of fraudulent transaction?
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Solution Summary
Several scholars are of the opinion that the internal auditor should not be tasked with uncovering fraud. The internal auditor may find errors and mistakes throughout the company's operations and financial records. In particular they refer to the fraudulent transactions committed by top managers and company officers. To add to the complexity of the subject, they added, the internal auditor has no education in legal matters. In addition, expanding the American business in foreign countries will add more complexity to the subject matter from legal and cultural stand point.
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Do you agree with their opinion? Why yes? Why not?
I do not agree with this opinion because a fraud should be reported in all the circumstances as it is in the best interest of all the stakeholders. If internal auditors discover the fraud, they should not think twice as it is very important from moral and ethical perspective as well that frauds should be reported as soon as they are discovered. Internal auditord should be trained and vigil enough to identify indicators or red flags of potential fraud and should conduct indepth enquiry to uncover fraud in the organization.
Post Enron fraud and series of events that led to the formation of SOX ACT, increased importance is given to an effective corporate governance in the organization. Internal auditors play an important role in ensuring the transparency and accuracy as well as reliability of organization's accounting practices. Internal auditor enhances the controls and monitoring environment for detecting fraud in the organization.
Even though internal auditors are not expected to possess the indepth expertise of those that specialize in detecting frauds, the current business environment expects internal auditors to gain such knowledge or expertise via specialized training in this area and help the organizational management in strengthening internal control and processes for ...
Education
- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
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