In practical reality, auditors can never guarantee that they will discover a material fraud, and regulation will never require this of them. But short of unattainable perfection, there is a great deal to accomplish. Financial statement auditors and internal auditors can become, in mind set and in method, far more capable of detecting material fraud. The procedures utilized in performing an audit can include more sophisticated testing and interviewing to identify first the risk and later the actual presence of fraud. Auditors can better train to address fraud to the full extent required by the standards governing their work. They can understand a great deal more about the work of forensic accountants and the red flags in the course of an audit that should prompt them to call in these specialists.
This book represents a major advancement toward achieving all of these things. It is a rich, multi-faceted, and fascinating answer to the need for wiser, savvier, better trained financial statement and internal auditors, thoroughly familiar with fraud detection techniques and with the intricate, demanding work of forensic accounting specialists.
It is equally a book for executives, company directors, audit committee members, and all others who have a stake in the integrity, accountability, and transparency of corporate information. This is a comprehensive book written by some of the best forensic accountants and auditors at PricewaterhouseCoopers. With more than 30 chapters, it reveals the surprising complexity of fraud deterrence, detection, and investigation, and offers a step-by-step approach to understanding that complexity.
The range of concerns is vast — for example, from the tightly constructed guidelines of SAS 99 (the most recent Statement of Audit Standards on fraud detection) to the experience-based, tough-minded skills required to conduct an admission-seeking interview with an alleged perpetrator. You will learn a great deal about fraud detection and investigative techniques, from the painstaking search in charts of accounts for fraud indicators to the forensic examination of seemingly deleted computer files, which actually persist on hard drives and can be reassembled in whole or in part. From basic techniques to intricate tests and technologies, it is all here in one book:
- Common fraudulent schemes
- The psychology of the fraudster
- The key value of professional skepticism
- Responding to whistle-blowers
- Working with lawyers and prosecutors
- Electronic data interrogation
A common theme running through all chapters is the urgent need for change:
For external and internal auditors to train thoroughly in fraud-detection procedures and attitudes — including knowing when to bring in the forensic accountants when suspicious activity is detected
- For university education of the next generation of auditors to reflect the new emphasis on fraud deterrence, detection, and investigation
- For the formal standards governing audit processes and objectives to evolve without delay to an updated and more rigorous approach to fraud
- For executives and directors to become fully aware of the threat of fraud and the means of deterring it, which range from robustly enforced codes of conduct to internal controls that reduce the likelihood that fraud will occur — or, if it does, that it be detected quickly
