scholarly journals A Task-Centered, Multiple Method Approach To Teaching Fraud Risk Assessment

2011 ◽  
Vol 3 (3) ◽  
Author(s):  
Bonnie W. Morris ◽  
Ann B. Pushkin ◽  
William E. Spangler
Keyword(s):  
Risk Assessment ◽  
Financial Reporting ◽  
Financial Statement ◽  
Occurrence Rate ◽  
Fraudulent Financial Reporting ◽  
Fraud Risk ◽  
Financial Statement Audit ◽  
Multiple Method ◽  
Approach To Teaching ◽  
Research In Education

This manuscript provides an approach to teaching fraud risk assessment that is based on an analysis of the task and relevant research in education, cognitive psychology, and artificial intelligence. Fraud risk assessment (FRA) in financial reporting is an important and difficult task that must be performed in every financial statement audit. When auditors fail to detect fraudulent financial reporting (FFR), they are likely to become targets of shareholder and creditor litigation. Although FFR has a low occurrence rate considering the large number of financial statement audits conducted, it has a devastating impact on the investors, creditors and the profession.

Dickinson Technologies, Inc.: Assessing Control Environment and Fraud Risk

2003 ◽  
Vol 18 (1) ◽  
pp. 71-78 ◽  
Author(s):  
Christopher P. Agoglia ◽  
Kevin F. Brown ◽  
Dennis M. Hanno
Keyword(s):  
Risk Assessment ◽  
Internal Control ◽  
Financial Statement ◽  
Risk Assessments ◽  
Background Information ◽  
Control Environment ◽  
Abstract Concepts ◽  
Fraud Risk ◽  
Financial Statement Audit ◽  
Fraud Risk Assessments

This instructional case provides you an opportunity to perform realistic audit tasks using evidence obtained from an actual company. Through the use of engaging materials, the case helps you to develop an understanding of the control environment concepts presented in SAS No. 78 (AICPA 1995), Consideration of Internal Control in a Financial Statement Audit, and fraud risk assessment presented in SAS No. 99 (AICPA 2002), Consideration of Fraud in a Financial Statement Audit. This case involves making a series of fraud risk assessments based on company background information and a detailed and realistic control environment questionnaire, which provide you a context that makes the often abstract concepts relating to control environment and fraud risk assessment more concrete.

SOX 404(b) Audits: Evidence from Auditing the Financial Close Process of the Accounting System

2019 ◽  
Vol 34 (3) ◽  
pp. 77-103
Author(s):  
Diane J. Janvrin ◽  
Maureen Francis Mascha ◽  
Melvin A. Lamboy-Ruiz
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Internal Controls ◽  
Data Availability ◽  
Financial Statement ◽  
Accounting System ◽  
Audit Process ◽  
Financial Statement Audit ◽  
Multiple Method ◽  
Access Controls

ABSTRACT Auditing Standard No. 5 requires that auditors integrate their evaluation of large issuers' internal control over financial reporting (ICFR) into their financial statement audit process, but the PCAOB warns that auditors may not adequately test related manual and systems internal controls. We use a multiple method approach to examine how auditors evaluate one important component of ICFR, the financial close process, and whether they evaluate it differently when conducting a SOX 404(b) integrated versus a financial statement audit. Interviewees relied heavily on walkthroughs, and tended to perform only cursory reviews of entity-level controls related to the financial close process. In addition, they often failed to test the link between the general ledger and supporting systems, including evaluating related access controls. Financial statement-only auditors were more likely to re-perform key controls than rely on cursory walkthroughs. Auditors performing integrated audits appeared to over-rely on ICFR findings when conducting financial statement audits. Data Availability: Interview data are available from the first author. PCAOB inspection reports are publicly available.

scholarly journals The Consideration Of Fraud In A Financial Statement Audit: Some Study Questions

2007 ◽  
Vol 3 (1) ◽  
pp. 37-44
Author(s):  
Eddie Metrejean ◽  
Lou X. Orchard ◽  
Dwight Sneathen Jr
Keyword(s):  
Financial Reporting ◽  
Major Part ◽  
Task Force ◽  
Financial Statement ◽  
Accounting Students ◽  
Fraudulent Financial Reporting ◽  
Financial Statement Audit ◽  
Auditing Standards

In October 2002, the Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit in response to recommendations from the Fraud Task Force. SAS No. 99 is intended to improve auditor performance during audits and to increase the likelihood that the auditors will detect fraudulent financial reporting if any is present. Since fraud awareness is such a major part of any audit, accounting students should be well versed on the content of SAS No. 99. However, not all accounting students read SASs in detail. Then how do accounting educators get this important content to these students?

scholarly journals Effects Of A Decision Aid For The Assessment Of Fraudulent Financial Reporting: An Application Of SAS No. 82

2011 ◽  
Vol 4 (9) ◽  
Author(s):  
Yee-Chy Tseng ◽  
Ruey-Dang Chang
Keyword(s):  
Risk Factors ◽  
Logistic Regression ◽  
Financial Reporting ◽  
Logistic Model ◽  
Decision Aid ◽  
Logistic Regression Model ◽  
Financial Statement ◽  
Font Size ◽  
Fraudulent Financial Reporting ◽  
Financial Statement Audit

<p class="MsoBodyTextIndent" style="text-justify: inter-ideograph; text-align: justify; line-height: 11.3pt; margin: 0in 37.2pt 0pt 0.5in; mso-line-height-rule: exactly;"><span style="font-size: 10pt; font-weight: normal; mso-bidi-font-weight: bold; mso-font-kerning: 0pt;"><span style="font-family: Times New Roman;">The Statement on Auditing Standards (SAS) No.82, <span style="mso-bidi-font-style: italic;">Consideration of Fraud in a Financial Statement Audit</span>, requires the auditor to assess the risk of material misstatement due to a fraud and to consider the assessment in designing appropriate audit procedures to be performed. The SAS No. 82 has thus explicitly made the detection of material fraud the auditor&rsquo;s responsibility. The purpose of the study is to use the risk factors identified in SAS No. 82 as the foundation to develop a decision aid to help auditors assess the likelihood of fraudulent financial reporting and to empirically test the effects of the decision aid on assessing the likelihood of fraudulent financial reporting. Using a sample of 45 fraud engagements and 206 nonfraud engagements, we developed and tested a logistic regression model that estimates the likelihood of fraudulent financial reporting. We found that the logistic model (proxied as a decision aid in the study) outperforms the practicing auditors in assessing risk for fraud and nonfraud cases.</span></span></p>

A Decision Aid for Assessing the Likelihood of Fraudulent Financial Reporting

2000 ◽  
Vol 19 (1) ◽  
pp. 169-184 ◽  
Author(s):  
Timothy B. Bell ◽  
Joseph V. Carcello
Keyword(s):  
Risk Factors ◽  
Financial Reporting ◽  
Internal Control ◽  
Decision Aid ◽  
Significant Risk ◽  
Control Environment ◽  
Fraudulent Financial Reporting ◽  
Fraud Risk ◽  
Financial Statement Audit ◽  
Significant Difference

The auditor's responsibility for detecting fraudulent financial reporting is of continuing importance to both the profession and society. The Auditing Standards Board has recently issued SAS No. 82, Consideration of Fraud in a Financial Statement Audit, which makes the auditor's responsibility for the detection of material fraud more explicit without increasing the level of responsibility. Using a sample of 77 fraud engagements and 305 nonfraud engagements, we develop and test a logistic regression model that estimates the likelihood of fraudulent financial reporting for an audit client, conditioned on the presence or absence of several fraud-risk factors. The significant risk factors included in the final model are: weak internal control environment, rapid company growth, inadequate or inconsistent relative profitability, management places undue emphasis on meeting earnings projections, management lied to the auditors or was overly evasive, the ownership status (public vs. private) of the entity, and an interaction term between a weak control environment and an aggressive management attitude toward financial reporting. The logistic model was significantly more accurate than practicing auditors in assessing risk for the 77 fraud observations. There was not a significant difference between model assessments and those of practicing auditors for the sample of nonfraud cases. These findings suggest that a relatively simple decision aid performs quite well in differentiating between fraud and nonfraud observations. Practitioners might consider using this model, or one developed using a similar procedure, in fulfilling the SAS No. 82 requirement to “assess the risk of material misstatement of the financial statements due to fraud.”

scholarly journals Fraud Risk Factors that Affect the Audit Program Plan: The Case of Kurdistan Region, Iraq

2020 ◽  
Vol 4 (2) ◽  
pp. 9-19
Author(s):  
Samer H. Alssabagh
Keyword(s):  
Risk Factors ◽  
Risk Assessment ◽  
Financial Reporting ◽  
Stepwise Regression ◽  
Kurdistan Region ◽  
Fraudulent Financial Reporting ◽  
External Auditors ◽  
Fraud Risk ◽  
Program Plan ◽  
Audit Program

This paper aims to identify the most frequent fraud risk factors that affect the nature, timing, and extent of planned audit procedures. The perceptions of both international and local external auditors in the Kurdistan Region, Iraq, were investigated. In general, it was found that the respondents were more interested in assessing fraud risk factors related to misappropriation of assets (84.61%) compared with those related to fraudulent financial reporting (75.43%). Stepwise regression analysis indicates a positive and significant effect of each fraud risk factor related to fraudulent financial reporting that resulted from incentives or pressures and attitudes or rationalization, and the fraud risk factors related to the misappropriation of assets that resulted from attitudes or rationalization on the nature, timing, and extent of the planned audit procedures. However, other fraud risk factors in the study model did not show a significant effect on the audit program plan. The findings of this paper contribute to the existing literature in the area of fraud risk assessment and its effect on planning audit programs in eastern developing countries such as the Kurdistan Region, Iraq.

Fraud of Financial Statements at Listed Enterprises on Ho Chi Minh City Securities Department

2018 ◽  
Vol 34 (4) ◽  
Author(s):  
Nguyen Tien Hung ◽  
Huynh Van Sau
Keyword(s):  
New York ◽  
Financial Reporting ◽  
Financial Statements ◽  
Financial Statement ◽  
Viet Nam ◽  
Fraud Triangle ◽  
Fraudulent Financial Reporting ◽  
Financial Statement Fraud ◽  
Corporate Fraud ◽  
Two Factors

The study was conducted to identify fraudulent financial statements at listed companies (DNNY) on the Ho Chi Minh City Stock Exchange (HOSE) through the Triangular Fraud Platform This is a test of VSA 240. At the same time, the conformity assessment of this model in the Vietnamese market. The results show that the model is based on two factors: the ratio of sales to total assets and return on assets; an Opportunity Factor (Education Level); and two factors Attitude (change of independent auditors and opinion of independent auditors). This model is capable of accurately forecasting more than 78% of surveyed sample businesses and nearly 72% forecasts for non-research firms.  Keywords Triangle fraud, financial fraud report, VSA 240 References Nguyễn Tiến Hùng & Võ Hồng Đức (2017), “Nhận diện gian lận báo cáo tài chính: Bằng chứng thực nghiệm tại các doanh nghiệp niêm yết ở Việt Nam”, Tạp chí Công Nghệ Ngân Hàng, số 132 (5), tr. 58-72.[2]. Hà Thị Thúy Vân (2016), “Thủ thuật gian lận trong lập báo cáo tài chính của các công ty niêm yết”, Tạp chí tài chính, kỳ 1, tháng 4/2016 (630). [3]. Cressey, D. R. (1953). Other people's money; a study of the social psychology of embezzlement. New York, NY, US: Free Press.[4]. Bộ Tài Chính Việt Nam, (2012). Chuẩn mực kiểm toán Việt Nam số 240 – Trách nhiệm của kiểm toán viên đối với gian lận trong kiểm toán báo cáo tài chính. [5]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.[6]. Võ Hồng Đức & Phan Bùi Gia Thủy (2014), Quản trị công ty: Lý thuyết và cơ chế kiểm soát, Ấn bản lần 1, Tp.HCM, Nxb Thanh Niên.[7]. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman independence on corporate fraud. Managerial Finance 26 (11): 55-67.[9]. Skousen, C. J., Smith, K. R., & Wright, C. J. (2009). Detecting and predicting financial statement fraud: The effectiveness of the fraud triangle and SAS No. 99. Available at SSRN 1295494.[10]. Lou, Y. I., & Wang, M. L. (2011). Fraud risk factor of the fraud triangle assessing the likelihood of fraudulent financial reporting. Journal of Business and Economics Research (JBER), 7(2).[11]. Perols, J. L., & Lougee, B. A. (2011). The relation between earnings management and financial statement fraud. Advances in Accounting, 27(1), 39-53.[12]. Trần Thị Giang Tân, Nguyễn Trí Tri, Đinh Ngọc Tú, Hoàng Trọng Hiệp và Nguyễn Đinh Hoàng Uyên (2014), “Đánh giá rủi ro gian lận báo cáo tài chính của các công ty niêm yết tại Việt Nam”, Tạp chí Phát triển kinh tế, số 26 (1) tr.74-94.[13]. Kirkos, E., Spathis, C., & Manolopoulos, Y. (2007). Data mining techniques for the detection of fraudulent financial statements. Expert Systems with Applications, 32(4), 995-1003.[14]. Amara, I., Amar, A. B., & Jarboui, A. (2013). Detection of Fraud in Financial Statements: French Companies as a Case Study. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 40-51.[15]. Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review, 443-465.[16]. Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5), 24-36.[17]. Persons, O. S. (1995). Using financial statement data to identify factors associated with fraudulent financial reporting. Journal of Applied Business Research (JABR), 11(3), 38-46.[18]. Summers, S. L., & Sweeney, J. T. (1998). Fraudulently misstated financial statements and insider trading: An empirical analysis. Accounting Review, 131-146.[19]. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary accounting research, 13(1), 1-36.[20]. Loebbecke, J. K., Eining, M. M., & Willingham, J. J. (1989). Auditors experience with material irregularities – Frequency, nature, and detectability. Auditing – A journal of practice and Theory, 9(1), 1-28. [21]. Abbott, L. J., Park, Y., & Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26(11), 55-68.[22]. Farber, D. B. (2005). Restoring trust after fraud: Does corporate governance matter?. The Accounting Review, 80(2), 539-561.[23]. Stice, J. D. (1991). Using financial and market information to identify pre-engagement factors associated with lawsuits against auditors. Accounting Review, 516-533.[24]. Beasley, M. S., Carcello, J. V., & Hermanson, D. R. (1999). COSO's new fraud study: What it means for CPAs. Journal of Accountancy, 187(5), 12.[25]. Neter, J., Wasserman, W., & Kutner, M. H. (1990). Applied statistical models.Richard D. Irwin, Inc., Burr Ridge, IL.[26]. Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education.[27]. McFadden, D. (1974). Conditional Logit Analysis of Qualita-tive Choice Behavior," in Frontiers in Econometrics, P. Zarenm-bka, ed. New York: Academic Press, 105-42.(1989). A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Econometrica, 54(3), 1027-1058.[28]. DA Cohen, ADey, TZ Lys. (2008), “Accrual-Based Earnings Management in the Pre-and Post-Sarbanes-Oxley Periods”. The accounting review.

scholarly journals Pengaruh Kecurangan Laporan Keuangan terhadap Nilai Perusahaan: Ditinjau dari Perspektif Fraud Pentagon (Kasus di Indonesia)

2020 ◽  
Vol 20 (1) ◽  
pp. 121
Author(s):  
Desi Elviani ◽  
Syahril Ali ◽  
Rahmat Kurniawan
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Stock Exchange ◽  
Sample Selection ◽  
Financial Statement ◽  
Fraudulent Financial Reporting ◽  
Financial Statement Fraud ◽  
Company Value ◽  
Negative Effect ◽  
Five Elements

This study aims to examine how the influence of fraudulent financial reporting on firm value is viewed from the perspective of a pentagon fraud with a sample of 71 companies from the infrastructure, utilities and transportation sectors in the Indonesia Stock Exchange in 2014-2018. The sample selection used was purposive sampling method. Company value is measured by price book value, financial statement fraud is measured by fraud-score models. There are two variables that have a positive and significant influence, namely the opportunity and arrogance variables, the two variables present two of the five elements of pentagon fraud, where as the three variables, pressure, rasionalization, competence, do not affect the fraudulent financial reporting. The results of this study have proven that fraudulent financial reporting has a negative effect on firm value.

Ramm Wholesale: Reviewing Audit Work (Retracted)

2013 ◽  
Vol 28 (3) ◽  
pp. 629-636 ◽  
Author(s):  
Douglas Kalesnikoff ◽  
Fred Phillips
Keyword(s):  
Risk Assessment ◽  
Real Time ◽  
Read Aloud ◽  
Financial Statement ◽  
Financial Statement Audit ◽  
Audit Strategy

ABSTRACT: Designed to be used in an undergraduate or Master's auditing course, this Case asks students to evaluate work performed on the financial statement audit of a private wholesale merchandiser. Through this evaluation, students can uncover issues relating to gaining knowledge of a client and its environment, risk assessment, materiality, audit strategy, and specific audit procedures for the revenue/receivables/receipts accounting cycle. The Teaching Notes provide support both for instructors who ask students to prepare the Case in advance of class and for instructors who instead assign the Case for analysis in real-time during class, whereby the Case is read aloud paragraph-by-paragraph and issues are discussed as they are detected.

A Synthesis of Fraud-Related Research

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 287-321 ◽  
Author(s):  
Gregory M. Trompeter ◽  
Tina D. Carpenter ◽  
Naman Desai ◽  
Keith L. Jones ◽  
Richard A. Riley
Keyword(s):  
Organizational Behavior ◽  
Financial Reporting ◽  
Recent Literature ◽  
Internal Controls ◽  
Future Research ◽  
Fraud Triangle ◽  
Fraudulent Financial Reporting ◽  
Academic Literature ◽  
Fraud Risk ◽  
Corporate Governance Mechanisms

SUMMARY We synthesize academic literature related to fraudulent financial reporting with dual purposes: (1) to better understand the nature and extent of the existing literature on financial reporting fraud, and (2) to highlight areas where there is need for future research. This project extends the work of Hogan et al. (2008), who completed a similar synthesis project, also sponsored by the Auditing Section of the American Accounting Association, in 2005. We synthesize the literature related to fraud by examining accounting and auditing literature post-Hogan et al. (2008) and by summarizing relevant fraud literature from outside of accounting. We review publications in accounting and related disciplines including criminology, ethics, finance, organizational behavior, psychology, and sociology. We synthesize the research around a model that illustrates the auditor's approach to fraud. The model incorporates auditors' use of the fraud triangle (i.e., management's incentive, attitude, and opportunity to commit fraud), their assessment of the existence and effectiveness of the client's anti-fraud measures (e.g., corporate governance mechanisms and internal controls), and their consideration of possible fraud schemes and concealment techniques when making an overall fraud risk assessment of the client. The model further illustrates how auditors can incorporate this assessment into an overall strategy to detect fraud by implementing appropriate fraud-detection procedures. We summarize the recent literature of each component of the model and suggest avenues for future research.

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