Essay: Changing Audit Procedures to Detect Fraud

Sample Essay

Donald (2005) suggests changing audit procedures in order to detect fraud; audits should be conducted using the bigger picture or from a wider view perspective. Employee fraud is normally for individual gain and does not result in fraudulent financial statements, while management fraud is usually for the purpose of falsely improving the appearance of the financial condition of the organization, which is considered fraudulent financial reporting. Management fraud is very hard to detect and prevent. The three characteristics of fraud that are usually present are..

a)      Perpetrators of fraud always have a reason for committing the fraud

b)      The opportunity to commit the fraud presents itself

c)      In the mind of the perpetrators, the perpetrators can justify the crime (Pawan, 2004)

When the client has an effective internal control system, and the auditor can assess the risk of the client, understand the business and industry of the client, utilize analytical procedures, and redesign the workplace of the auditor to help assess the risk of fraud, then the auditor can more effectively prevent and detect fraud in the financial statements of the client.

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