Audits that keep fraudsters guessing.Scratch the surface of many audit plans and you'll find predictable elements that someone bent on Adj. 1. bent on - fixed in your purpose; "bent on going to the theater"; "dead set against intervening"; "out to win every event" bent, dead set, out to fraud can anticipate and foil. That's why SAS (1) (SAS Institute Inc., Cary, NC, www.sas.com) A software company that specializes in data warehousing and decision support software based on the SAS System. Founded in 1976, SAS is one of the world's largest privately held software companies. See SAS System. no. 99, Consideration of Fraud in a Financial Statement Audit, requires auditors to incorporate elements of unpredictability into their procedures. Here's how. [] Use random sampling. Auditing a patternless selection of items makes it impossible for fraudsters to determine which will be chosen. [] Conduct surprise visits. Showing up unannounced to count inventory prevents employees from fraudulently moving goods from one location to another just to fool auditors. [] Change the timing. At clients where accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying traditionally are confirmed at fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. , try performing this audit procedure two months early. [] Vary your technique each year. If you've always tested a sample of transactions posted to an account, switch to an analytical test that compares account activity with production data. That might make fraud easier to spot. [] Evaluate low-profile accounts. Selecting accounts that are not normally audited might reveal items being hidden in them for just that reason. Test small accounts. Checking them could reveal fraudulent transactions spread over several accounts of relatively insignificant size. [] Look for bogus patterns. Use Benford's Law Noun 1. Benford's law - a law used by auditors to identify fictitious populations of numbers; applies to any population of numbers derived from other numbers; "Benford's law holds that 30% of the time the first non-zero digit of a derived number will be 1 and it will , a statistical formula for evaluating the frequency of given values in a random sample, to expose implausible numeric data Refers to quantities and money amounts used in calculations. Contrast with string or character data. . (See "I've Got Your Number," JofA, May99, page 79, www.aicpa.org/pubs/jofa/may1999/ nigrini.htm.) [] Observe operations discreetly. Monitoring customer traffic or vendor deliveries from a nearby vantage point may reveal discrepancies in recorded revenue. [] Review whistleblower whis·tle·blow·er or whis·tle-blow·er or whistle blower n. One who reveals wrongdoing within an organization to the public or to those in positions of authority: "The Pentagon's most famous whistleblower is . . files. Look over employee reports of company mal- or misfeasance A term used in Tort Law to describe an act that is legal but performed improperly. Generally, a civil defendant will be liable for misfeasance if the defendant owed a duty of care toward the plaintiff, the defendant breached that duty of care by improperly performing for indications of fraud. [] Use audit software. Test large electronic transaction files for duplicate payments, invoices or addresses for multiple employees or vendors that often escape notice when checked manually. [] Get a clearer view of the numbers. Use graphs to display daily, weekly or monthly data--such as the number and dollar amount of transactions or journal entries--on key cycles or processes to make it easier to spot abnormal amounts and address the risk of management override. [] Embed software monitors. Get the client's permission to design and plant a program to capture, encrypt and record key data for auditors to analyze later. [] Check the Web. Visit Internet chat groups in which employees who own the client's stock discuss operational or other issues that might merit consideration as part of an effective audit. [] Use alternative models. Develop independent evaluation models and assumptions, instead of using those supplied by management, to verify clients' estimates of warranty costs and other charges. Editor's note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : SAS no. 99 (product no. 060701JA) can be ordered at www.cpa2biz.com. |
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