Fraud AuditPertemuan VI

Matakuliah : F0184/Audit atas KecuranganTahun : 2007

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• Mahasiswa diharapkan mampu mengidentifikasi audit atas kecurangan, dan audit keuangan

• Mahasiswa dapat mengetahui fungsi dari auditor kecurangan

• Mahasiswa diharapkan mengetahui perbedaan antara auditor kecurangan dan auditor keuangan

Learning Outcomes

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• Fraud audit and financial audit• Fraud Auditor Profile• Fraud Auditor Vs Financial Auditor

Outline Materi

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Principles of Fraud Auditing• Fraud auditing is unlike financial auditing. It is

more a mind-set than a methodology.• Fraud auditors focus on exceptions, oddities,

accounting irregularities, and patterns of conduct, not on errors and omissions.

• Learning to be a fraud auditor means learning to think like a thief.

• From an audit perspective, fraud is intentionally misrepresenting financial facts of a material nature. From a fraud audit perspective, fraud is an intentional misrepresentation of financial facts.

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Principles of Fraud Auditing (Con’t)• Fraud are committed for economic, egocentric,

ideological, and psychotic reason. Of the four, the economic motive is the most common.

• Fraud tends to encompass a theory structured around motive, opportunity, and benefit.

• Fraud in a computerized accounting environment can be committed at any stage of processing-input, throughput, or output. Input frauds are the most common.

• The most common fraudulent schemes by lower-level employees involve disbursements.

• The most common fraudulent schemes by higher-level managers involve “profit smoothing”.

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Principles of Fraud Auditing (Con’t)• Accounting-type frauds are caused more often by

absence of controls than by loose controls.• Fraud incidents are not growing exponentially,

but fraud losses are.• Accounting frauds are discovered more often by

accident than by financial audit purposes or design. Over 90% of financial frauds are discovered by accident.

• Fraud prevention is a matter of adequate controls and a work environment that places a high value on personal honesty and fair dealing.

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Common Mistakes From Fraud Auditor

Converting audit to investigationNot properly coordinating with other departmentsUnderstanding the legal issue to make the caseMaintaining appropriate confidentialityUnderstanding management’s interest in the fraud

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Common Mistakes From Fraud Auditor (Con’t)

Obtaining the evidence that is later found to be inadmissibleHow to put findings and observations into writingNot proving the defendant innocentUnderstanding what an audit procedure can & can’t detectLack of Investigation Plan

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Carl Jung TaxonomyLeft Hemisphere………… Right Hemisphere

Sensation/ Sensation/ ThinkingThinking

Financial Financial AuditorAuditor

Intuition/ Intuition/ ThinkingThinking

Fraud Fraud AuditorAuditor

Sensation/ Sensation/ FeelingFeeling

TeacherTeacher

Intuition/ Intuition/ FeelingFeeling

ArtistArtist

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The Iceberg Theory of Fraud

waterline

Structural consideration

Behavioral consideration

Overt AspectHierarchyFinancial ResourcesGoal of organizationSkill and abilities of personnelTechnological StatePerformance standardsEfficiency Measurement

Covert AspectAttitudeFellingValuesNormInteractionSupportivenessSatisfaction

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Competency Needed for Fraud Auditor

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Legal• Criminal, civil and contractual fraud• Fraud versus Theft and embezzlement• Material versus immaterial misrepresentation• Error versus irregularities• Mistakes versus misstatement• Conspiracies versus individually perpetrated

fraud

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Organizational• Fraud committed or against the company• Insider and outsider fraud• Insiders in conspiracies with outsiders• High level and low level employee fraud• Long-term and short-term performance criteria• Fraud in high-trust and low-trust organization

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Audit• Internal and external auditor responsibilities• Statement and transaction fraud• Overstated and understated records• On-book and off-book fraud• Financial and fraud auditing• Concealment, destruction, and alteration of records• Fraud in manual versus computerized accounting

systems

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Investigative• Compromising control and personnel• Motivation on fraud• Detection and prevention of fraud• Psycho-social characteristic

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Risk Management• Risk prevention, transfer and assumption• High risk companies, industries, occupations,

personalities• Red flags

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