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Facts You Should Know About Fraud Auditing

What is Fraud Auditing?

How is Fraud Defined?

Fraud is define by the book Managing the Business Risk of Fraud: A Practical Guide as “any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain.”

Whose Responsibility is Fraud Auditing?

Fraud auditing is under the responsibility of auditors. These people provide their services to individuals and organizations alike. You can either hire them as internal or external auditors.

There are instances and situations wherein the audit that performed by internal auditors in Dubai need to reviewed and assessed by that of an external auditor.

However, it should be noted that the audit is not performed for the purpose of unveiling fraud. More often than it, it is done as mandated by the law here in the UAE to ensure that financial statements are fair and correct.

Who is Responsible for the Prevention and Detection of Fraud?

This responsibility falls on those people who are in charge of governing and regulating a company (e.g., the board of directors) and the management as well. It is their job to ensure that measures against fraud set to prevent opportunities to ruined.

What are the Two Types of Audit Fraud?

There are two types of audit fraud with distinctive differences.

Fraudulent Financial Reporting

This is perform by a company’s senior management (CEO, CFO, COO). It consider as being committed by the organization itself to benefit the company.

Misappropriation of Assets

This type of audit fraud performed by lower-level employees who commit fraud against the company to benefit themselves.

Of the two types of audit fraud, the first one is the most concerning for the auditors or auditing firms in Dubai.

Also Read: HOW TO CHOOSE AN AUDITOR: THREE KEY FACTORS TO CONSIDER

What Causes Fraud?

There are many reasons why fraud rises from a company. Generally speaking, it may be because there is an open door to commit fraud or there is pressure to commit it. These open doors and pressures should determined in order for them to dealt with using proper internal controls.

What is the Audit Fraud Triangle?

This explains the reasoning behind people’s decision to commit fraud in a company.

The Audit Fraud Triangle broken down into three parts:

  1. The Pressure

This indicates the pressure that a company’s management feels when they need to meet the expectations and requirements of an investor, analysist, lender, etc.

  1. Opportunities for Fraud

This the open door that mentioned above. There are instances wherein people just see the opportunity to commit it because of the lack of commitment of the management or the head of the whole organization to practice ethical morals and policies in their company.

  1. Rationalizations of Fraud

A management that makes unrealistic forecasts that their company also needs to meet makes dangerous risks and makes aggressive decisions and a person who suffers from external factors (the need to take care the family, debts) can be pushed to rationalize their actions of committing the crime for them to simply meet their needs.

Also read: 6 THINGS YOU SHOULD PREPARE FOR YOUR AUDITORS IN DUBAI

Fraud Auditing Should Be a Culture

Fraud can happen in a company. however, this is why fraud auditing should be integrated as a process in an organization for the management and employees alike will be aware of how serious a firm is. A consistently done fraud auditing can prevent people to commit fraud.

What is the Role of an Auditor in This Scenario?

Focus on Risk Assessment

If the potential for fraud is palpable when an auditor performs an audit, auditors tend to focus on risk assessment procedures. This means that they will ask around in a company about any unusual behavior by a certain employee or an infrequent situation that occurred.

Examine the General Behavioral Patterns of Workers

Aside from looking for unusual transactions in the books and uncommon associations of numbers in the records, auditors also scrutinize and observe the patterns of employees’ behaviors. This means they may research on any financial struggles, problems, issues, or other outside factors.

Look for Red Flags

Auditors will also look for any pressure or reason at all for an employee to commit fraud. They will also look for unforeseen results or any weird patterns from the previous years and the current year.

Leading Auditors in Dubai on Fraud Auditing

Fraud is possible to be an issue in a company no matter how big or small it is. However, Farahat & Co. in Dubai from top audit firms in Dubai can help you to prevent this and determine as well if it is already happening in your firm.

Our team consists of regulated auditors in Dubai that have handled many audits in companies across the country.

Let us help you deal with the audit concerns that you have. However, You can also discuss with us by contacting us and booking a free consultation with our auditors in Dubai.