All You Need To Know About Audit Frauds

According to a source, UAE’s State Audit Institution set up in the year 1971, revealed financial irregularities of about Dh60 million, last year. The inconsistency in the finances was dominant in public procurement contracts. Numerous employees and accomplices were found to be involved in the fraud!

This is just tip of the iceberg for accounting frauds in the UAE, from small scale book keeping to organizational audit frauds; the world of fraudulent activities is vast!

Determining frauds and parties involved requires the expertise of the best accounting firms in Dubai that provide consultation along with audit services to help firms regulate their finances. The article below talks about the types frauds in audit and the response of a competent audit firm.

All About Audit Frauds In Organizations

Whether it’s the top management involved in jumbling up numbers, or the lower level employees out to get more share than they deserve, companies may find themselves experiencing audit frauds time and again. Timely detection and response remains essential to ensure the company remains functional and no permanent damage occurs. Read on to know more.

Frauds in Audit

Audit frauds may be characterized as:

Fraudulent Financial Reporting

Frauds in financial reporting are usually committed by the senior management of an organization. The internal perpetration benefits the company itself. Auditors and auditing companies consider these serious frauds that require immediate attention.

Misappropriation Of Assets

Usually, the lower level employees are responsible for carrying out this type of audit fraud. Committed at lower levels they are damaging to the organization and beneficial only to the individuals committing them.

What Is The Audit Fraud Triangle?

The audit triangle refers to the conditions that prevail in organizations at the time of the frauds being committed, often acting as contributors towards the fraud: 

Pressures And Incentives

  • Companies that are under continuous pressure to meet with the expectations set by investors for analysts.
  • Performance based bonuses and net income along with any stock options presented to employees in the form of incentives, may also be significant contributors towards employees committing such frauds.

Opportunities For Committing Fraud

  • The top management or the board of directors may not be as involved as it should be towards implementation of ethical policies and morals leaving little resistance for employees.
  • When significant estimates and judgments are involved in accounting, it gives rise to numerous opportunities for fraud too.

Problems That Arise From Attitudes

  • In case the management of the organization is extremely careless and allows aggressive risks. Unrealistic forecasts of the management make it harder for targets to be met.
  • Ethics in the top management are poorly demonstrated which gives fraudsters the leverage to rationalize their fraudulent schemes.

Auditor’s Role In Detection

In case an auditor finds opportunities for fraud in an audit. They will focus on risk assessment procedures and concentrate on the risk assessment.

Auditors maintaining their skepticism need to inquire the audit committee about the management if they notice strange behaviors among certain employees. Since it's their job to determine who may be involved.

Detection of audit frauds isn't just about any anomalous interconnections observed in numbers and books, but it also involves the identification of any hardships and employee patterns exhibited whether financial or otherwise at the time.

Moreover, the auditors observe the fraud triangle and determine any red flags; incentives or pressures that could force employees to perform such activities. Industry data is also compared to see what the trend generally was and will be in the future.

Auditor’s Responds By:

  • Collecting documents as evidence
  • Obtaining evidence from other parties, apart from the client
  • Increasing sample size to certify findings
  • Performing procedure towards year end
  • Verifying values in financial statements

Concluding Remarks

From planning to implementation, auditors ensure a comprehensive methodology when determining any malicious activities. In addition, it's only the best accounting firms that can help clients understand what type of audit frauds are being committed at their organization.

Choose the best accounting firms in Dubai and get your firm audited not only to ensure compliance but also to determine any fraudulent activities!

 

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