4 Discussions

Good afternoon everyone,

This week's post discussion is very interesting since it indicates when it is time to conduct an audit or a fraud examination. From my point of view I think it is important to first emphasize the objective of an audit and the objective of a fraud examination. According to article “Audit vs. Fraud Examination. What’s the Real Difference” by Carmichael. D. (2018) ,to conduct an audit there does not have to be a suspicion of fraud, in many cases they are simply performed to verify if the company's financial statements are made under the established accounting standards, in addition to that the objective of audits is to express an opinion that these financial statements are related to the information in the company's books; and a fraud examination is generally performed when there is a suggestion that a fraud has occurred, a fraud is occurring or a fraud could occur, and it is through this process that the allegations of fraud are resolved.( Carmichael. D., 2018).

From my point of view in the hypothetical case that I would suggest the use of a fraud examiner instead of an auditor, it would be for the red flags that I as a professional would observe in the information that my client would provide me, among the red flags that will call me attention would be:

Bad segregation of duties.

Inconsistency in financial reports,

Weak internal control,

Poor cooperation by managers,

Whistle blowing that something wrong is happening, among others.

The  article Corporate fraud prevention and detection: Revisiting the literature  by Mangala, D., & Kumari, P. (2015),  points out that due to globalization and permanent competition in industries, fraud has increased, mentioned  that the first line of defense in a fraud is the internal auditors since they know the mechanics of the internal controls of the company, but if these internal auditors are engaged in any irregularity, the presence of a fraud examiner is essential since he/she  has the skills and techniques to analyze information in a professional manner and look for how, when and who could be carrying out a fraud.( Mangala, D., & Kumari, P.,2015)

Comment Topic 2 (MR)

The latest report to the nations on occupational fraud and abuse is for 2018. Being the 10th edition of reports of this kind, it is the largest global study on fraud. The highlights from the report are that there were 2,690 cases of occupational fraud, from 125 countries covered in the report. The report covers 23 major industries and its main focus is on fraud costs, schemes, victims of the perpetrators of the schemes (Gates et al., 2016).   

Until I read this report I did not know that occupational fraud and abuse is this big across the globe. Particularly I was surprised that corruption is the biggest form of fraud, leading the others at 47%. I think corruption as a form of fraud has to do with people character and also organizational ethical policies (Daigle, et al., 2018).  To effectively prevent or minimize this type of fraud, it is important that organization has strong ethics culture to promote honestly and appreciation of hard work. Some techniques that can be used to fight corruption include removing the red tape in organization so that information flows and is acted up on faster. This will encourage subordinated to report incidences of corruption that otherwise will go unreported. In addition, organizations need to invest in technology and connect all stakeholders besides giving them power to talk and report any issues they find inappropriate. Institutional policy such as zero tolerance to corruption will also go a long way in curtailing corruption. Such policies should also highlight the punishment one attracts by engaging in corruption. Such punishment should be deterred enough such as one being fired and then prosecuted. Training employees on negative effects of corruption, how to deal with it and also conducting surprise audits can deal a blow to corruption (Johannsen, & Pedersen, 2012).

An example of corruption in modern organizations is when a manager of receives kickbacks from a company so that they can award it contracts.