Prospective Errors and Fraud Detection

This assignment delves into the crucial role of auditing in identifying potential errors and fraudulent activities within an enterprise. It emphasizes the importance of delegation, control implementation, performance monitoring, supplier relationship management, and proper documentation to mitigate these risks. The text highlights the responsibilities of internal auditors and their contribution to enhancing organizational performance.

AUDIT AND ASSURANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
Does internal audit have a role in the fight against fraud............................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
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INTRODUCTION
The external complexities and increasing pressure of frauds committed by an individual
has raised the overall scope of auditing to be conducted in the organizations. The word audit
refers to the close examination of all business transactions on constant basis to remove minute
errors takes places in order to produce accurate and reliable financial statements. The assurance
objectives are related to the auditing as the audit of an entity is completed with high level of
accuracy and proper evidences has collected from various sources. The opinion expressed on the
report prepared by the auditors are regarded as one of the important statements to be presented in
the external world for further dealings.
Does internal audit have a role in the fight against fraud
Fraud is regarded as one of inherit aspects attached with all kinds of the business
transactions which needs to be assessed by the auditors appointed by an organization in order to
assess their internal business efficiency are known as internal auditors. The term fraud is defined
in the legal terms as an intentional mistake committed by an individual in an organization exist in
the material (Gupta and Rai, 2016). It can be regarded as the false vouchers and forged business
transactions that lead An enterprise towards the pile up of all business transactions into big fraud
is generally termed as fraud as in this case the intention of an entity is to affect the other party's
interest financially. The frauds can be of different forms in an enterprise such as omissions,
intentional mistakes, misunderstanding created in the making of financial statements based on
the false assumptions, concealing of facts and figures in order to affect an enterprise's business
performance. The traditional perspective of an individual related to the terminology fraud as it
affect an entity's performance which will affect the behavior of the auditor. The various angles
from which this particular term has been assessed by the auditors in order to ascertain the truth
regarding their business (Gupta and Rai, 2016). The fraud can be committed in formed of risks
and control which is considered as separate and regarded as one of the secondary objectives of
internal audit and internal control. The overalls design of an enterprise are framed by the top
management in order to assign all tasks and duties in order to facilitate all of their employees in
completing their duty without affecting the business productivity in return. The weakness lies in
the internal control of an organization will reflect the deficiency of an organizational owner in
amending their business decisions in order to avoid mistakes to be committed at the same
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workplace. The failure of internal control is termed as fraud as it can be improved by the
management by improving their performance by incorporating external changes. The mis-
communication in an organization can be one of the causes of increasing the range of frauds in
an enterprise. The short gaps among the employees and the management can deteriorate the
overall performance of the business by creating turbulence in their business relationships. The
current perspective of auditors has changed as the frauds of risks and controls are considered as
one of the integral objectives of the internal control activities as the minor mistakes committed
by the management will lead the overall enterprise towards the failure which will affect all
employees of an organization. The small mistakes of the owner will result into losing of all the
employees job due to financial crisis in an enterprise (Knechel, 2016). The fraud in the present
terms is to be regarded as the real default conducted by the organization due to the mistakes
found in the internal control of an entity.
The terminology used commonly in an organization is Fraud which is clearly explained above as
the focus of the current report is on defining the role of internal auditors related to the fraud. The
institute of internal auditors has clarified the roles and responsibilities of the internal auditors
related to the fraud. The board has highlighted on the objectives of assurance which needs to be
complied by an enterprise in management and controlling of frauds in the organization. The aims
and objectives framed by this institute as these controls are sufficient in identifying all the
prospective areas of risks. The primary objective of the internal auditor is to express their
opinion on the truth and fairness of the financial statements of an enterprise. The performance of
an organization is reflected by commenting upon their financial statements. The management is
responsible for preventing and detecting frauds and errors covered in their enterprise and
financial statements (Simnett, Carson and Vanstraelen, 2016). The secondary objective of the
internal auditor is to detect frauds and error which is resulted due to the financial transactions
takes place in an enterprise. The internal auditors are appointed in an organization in order to
prepare accounting records in an enterprise in order to check the business efficiency on a regular
basis to eradicate minor mistakes takes places in the business transactions. There are various
roles and responsibilities of the internal auditors which are need to be complied by an auditor in
meeting their obligations in achieving desired goals and the objectives of an organization which
are given as follows:
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Fraud risks- The duty of the internal auditors is to assess the accuracy of all the frauds and the
risks prospected in the entity as the internal auditor must have sufficient knowledge of all kinds
of frauds in removing them from its deep root. The internal auditors need to be managed and
controlled all kinds of risks arises in an entity by using various kinds of techniques or principles
used in assessing their pressure on an enterprise. The pressure imposed on an enterprise is to
improve their performance which directly order auditor to monitor the frequent changes incurred
in an entity related to the fraud by identifying what will be the purpose of committing fraud by
the defaulters (Lau, 2016). The rationale behind committing this kind of fraud will need to be
assess by an auditor which will help them in order top know the mindset of the defaulter to
prepare trap according to their mentality in order to find the culprit. The opportunities will be
perceived in advance by the auditor by scanning the current internal control of an organization to
analyses the situations that will incur the fraud in near future.
The auditors which is appointed by an entity in order to assess their internal business functioning
by applying various tools and techniques. These methods can range from applying risk
assessment, developing audit plans which will guide an auditor in starting their complete audit in
order to find the areas where there are minute risks arises related to the future potential areas of
the risks. The internal auditor will be appointed in the corporation for conducting internal audit
in an entity that can support the entire firm in understanding the inherent nature of the risks by
increasing awareness in the employees as they are the rationale actors who can make business
decisions related to an organization (Meadley, Mrcog and Mrcog, 2016). The compliance of
various rules and regulations will help an entity in order to complete their audit without effecting
the productivity of all employees and the business in return.
There are certain areas of potential risks which can be incurred in an enterprise which will clarify
all doubts and queries related to the prospective errors in an enterprise which are given as
follows:
 The top management need to delegate several business responsibilities in an organization
by imposing proper control in order to find legal evidences and the defaulter who
committed fraud. The flow chart systems or hierarchical systems should be adopted while
assigning responsibilities from top management to the lower management which will
clarify each role at the different level.
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 The entity need to keep track on this employee's performance who resist to change in the
firm or who opt to work alone as these people are the prospective defaulters.
 The business is a close network of different external parties in the form of suppliers who
have close relationship with the business can make default in the organization by selling
forged vouchers (Gupta and Rai, 2016). The relationships with the suppliers need to be
done while forming legal agreement in order to protect itself from further complications
arises in near future.
 The lack of documentation for all the business transactions in an enterprise may create
the situations of confusion in an entity which may create frauds without creating
suspicion in the eyes of the management. All business transactions should be backed by
legal vouchers which are pass on to next stages for checking and should have initial of
legal authority.
CONCLUSION
It can be summarized from the above project report that auditing is regarded as one of the
important aspects of an organization in assessing their financial performance. The role of internal
auditors has explained throughout the report which will help an entity in enhancing their current
performance. The role of internal auditor is secondary related to finding prospective areas of
frauds and errors.
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REFERENCES
Schmidt, P. J., Wood, J. T. and Grabski, S. V., 2016. Business in the Cloud: Research Questions
on Governance, Audit and Assurance. Journal of Information Systems.
Meadley, K., Mrcog, I. I. H. and Mrcog, S. I. S., 2016. Audit: quality assurance in the
Colposcopy Clinic. European Journal of Obstetrics and Gynecology and Reproductive
Biology. 206. p.e74.
Knechel, W. R., 2016. Audit quality and regulation. International Journal of Auditing. 20(3).
pp.215-223.
Gupta, A. and Rai, S., 2016. Challenges Before Finance Professional in Ethical Decision
Making. Global Journal For Research Analysis. 5(2).
Lau, T. K., 2016. Commentary on Down syndrome screening in China. BJOG: An International
Journal of Obstetrics & Gynaecology. 123(S3). pp.30-30.
Simnett, R., Carson, E. and Vanstraelen, A., 2016. International Archival Auditing and
Assurance Research: Trends, Methodological Issues and Opportunities. Auditing: A
Journal of Practice and Theory.
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