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NCJ Number: 65764 Find in a Library
Title: DETECTING MANAGEMENT FRAUD - THE ROLE OF THE INDEPENDENT AUDITOR (FROM WHITE-COLLAR CRIME - THEORY AND RESEARCH, 1980, BY GILBERT GEIS AND EZRA STOTLAND - SEE NCJ-65757)
Author(s): J E SORENSEN; H D GROVE; T L SORENSEN
Corporate Author: Sage Publications, Inc
United States of America
Date Published: 1980
Page Count: 31
Sponsoring Agency: Sage Publications, Inc
Thousand Oaks, CA 91320
Type: Report (Study/Research)
Format: Document
Language: English
Country: United States of America
Annotation: THIS ARTICLE IDENTIFIES WHY THE AUDITOR'S ROLE IN DETECTING MANAGEMENT FRAUDS IS INCREASING AND HOW INDEPENDENT AUDITORS CAN IMPROVE APPROACHES FOR REVEALING SUCH FRAUDS.
Abstract: FRAUD IS AN EVER-PRESENT THREAT TO ANY ORGANIZATION, AS MANAGEMENT PERSONNEL HAVE THE OPPORTUNITY TO CIRCUMVENT THE ACCOUNTING SYSTEM CONTROLS TO MISAPPROPRIATE OR MISUSE FINANCIAL INFORMATION OR MISLEAD FINANCIAL STATEMENT USERS. THE INDEPENDENT AUDITOR'S ROLE IN THE DETECTION OF MANAGEMENT FRAUD HAS BEEN SPOTLIGHTED BECAUSE OF A NUMBER OF WELL-PUBLICIZED AUDIT FAILURES ASSOCIATED WITH MAJOR MANAGEMENT FRAUDS. SINCE 1960, AND MOST NOTABLY IN 1977, THE INDEPENDENT AUDITING PROFESSION HAS ACTED TO INCREASE ITS RESPONSIBILITY FOR THE DETECTION OF DECEPTIVE FINANCIAL PRACTICES, ERRORS, IRREGULARITIES, AND ILLEGAL ACTS. EFFORTS HAVE BEEN MADE TO BETTER DOCUMENT THE MANAGEMENT REPRESENTATIONS RELIED ON BY THE AUDITOR AND TO REQUIRE COMMUNICATION OF MATERIAL WEAKNESSES IN INTERNAL ACCOUNTING CONTROLS. AN AUDITOR NEEDS TO DEVELOP A CONCEPTUAL EARLY-WARNING SYSTEM THAT WILL HELP IN SPOTTING THE 'RED FLAGS' ASSOCIATED WITH MANAGEMENT FRAUD. AN ANALYSIS OF 10 RECENT MAJOR MANAGEMENT FRAUDS SHOWS THAT RED FLAGS FOR THE AUDITOR ARE TIED TO CONDUCIVE ECONOMIC CONDITIONS, CONDUCIVE BUSINESS STRUCTURES, LACK OF AUDITOR UNDERSTANDING, AND THE PRESENCE OF FACILITATING PRACTICES. NUMEROUS CASE STUDIES ILLUSTRATE THE METHODS OF FRAUDS COMMITTED (CATEGORIZED AS EXTERNAL FRAUD FOR THE COMPANY'S WELFARE AND INTERNAL FRAUD AGAINST THE COMPANY'S WELFARE) AND RELATED AUDITING PROBLEMS. REFERENCES, A CHART, AND TABULAR DATA ARE PROVIDED. (RCB)
Index Term(s): Case studies; Criminal investigation; Financial management; Fraud; White collar crime
To cite this abstract, use the following link:
http://www.ncjrs.gov/App/publications/abstract.aspx?ID=65764

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