If you’re an auditor inspiring to bring a change in the business industry, then unraveling the white-collar crimes can be an ideal head-start. Since such a financial crime is the most difficult to unearth, thereby, extra effort and intuitiveness is required to get the job done. The post specifically refers to the external auditors, as internal auditors form part of the status quo, i.e. they are regular employees of the entity. Although, they can, if they wish so, decide to be the whistle blower.
Fraud Risk Assessment
An auditor first needs to conduct fraud risk assessment. The preliminary evaluation can then help the auditor make further inroads into the possible fraud risks prevalent within the organization. Barring aside the rest, the focus of this piece is to locate the white-collar crimes. The amounts involved are huge, the stakes are high, and the top management personnel are the ones involved. Such a cobweb makes it extremely difficult to detect fraud. An external auditor should spend considerable time getting to know the entity and the control procedures it has in place. Knowing the organization and the management is an integral part of an audit, and something that can be helpful in terms of external audit as well.
Fraud is committed when there’s an incentive to do so. Even if the controls are effective enough, the management of an organization would have an idea of how to get through it. If few of the management personnel decide to work together and manipulate the internal controls, then they’d be in a position to commit financial fraud. All of this can go unscathed, particularly if the auditor does not pay much attention to the mentioned fact. Discussions should be held with the management and the possibility of a white-collar crime should be gauged by the auditor. What procedures to be followed and the questions to be asked to the management is a subjective concept, and it varies from situation to situation.
A Questioning Mind
An auditor is to probe financial statements and the financial information related thereof. For that, s/he needs to go about the business with a questioning mind. Only then the auditor would be able to detect all types of fraud, including white-collar crimes. It must be noted that suspecting everything isn’t what it implies, rather being skeptical and looking for answers is what the auditor should do to unearth white-collar crimes. Have it covered- Good to go!
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