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Auditor's Role in Prevention and Detection of Financial Statement Fraud

NCJ Number
Revija za Kriminalistiko in Kriminologijo Volume: 63 Issue: 4 Dated: 2012 Pages: 301-310
Andreja Lutar Skerbinjek, Ph.D.
Date Published
10 pages
This paper discusses the auditor's role in prevention and detection of financial-statement fraud in a recession time.
For that purpose, samples of financial statement fraud are presented first. Financial statements fraud is sometimes titled as creative accounting. It comes from professional role that fraud prevention and detection is the primary responsibility of management and those charged with entity's governance. The auditor's objectives dealing with frauds refer to identifying and assessing risks of material misstatement due to financial- statement fraud by designing and implementing appropriate responses and respond appropriately to financial statement fraud or suspected financial-statement fraud that is identified in the audit. Internal auditors as well as external auditors play an important role in prevention and detection of fraud. Internal auditors are frequently trustees who get tips about employee wrongdoing. External auditors on the other hand have the advantage of unpredictability, which gives them a better chance to discover fraud should it occur. If more frauds are detected, it discourages potential fraudsters from initiating a fraud. This way auditors help in preventing frauds, and more committed frauds are detected. (Published Abstract)


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