FORENSIC ACCOUNTANTS & DETECTING FRAUDS

The Role of Forensic Accountants in Detecting Frauds in Financial Statements

Table of contents

Chapter 2: Literature Review4

Rationale4

Aims and Objectives5

Significance of the Study5

Research Questions5

Research design6

Definition of Forensic Accounting6

Introduction7

Frauds and Omissions as the Causes of Inaccuracy of Financial Statements9

Factors Affecting Financial Fraud at an Organization13

Types of Fraud Detection14

Financial Statement Fraud16

Procedures and Ability of Auditors to Detect Fraud17

High-Risk Areas20

Control Mechanisms and Institutions Responsible for Investigating and Detecting Frauds in Financial Statements21

Forensic Accounting and the Role of Forensic Accountants In Detecting Frauds In Financial Statements24

Fraud prevention and detection strategies33

Fraud vulnerability review34

Gamesmanship review35

Vigilant and effective corporate governance36

Vigilant audit committees38

Fraud prevention programs40

Enforcement procedures41

Forensic fieldwork audit43

Auditors' independence45

Communication with the board of directors and the audit committee46

Internal audit efficacy47

Limitations of the study48

Conclusion & recommendatiosn48

References53

The Role of Forensic Accountants in Detecting Frauds in Financial Statements

Chapter 2: Literature Review

Rationale

This study highlights many issues related to Role of Forensic Accountants and gives a broad analysis of Detecting Frauds in Financial Statements. Forensic accounting is certainly not a new field. Evidences showed that the profession has been in existence a long time ago though during that time the profession was not yet being called forensic accounting. In ancient Egypt, forensic accountants who inventoried the Pharaohs' grain, gold and other assets were called the 'eyes and ears' of the Pharaohs. Another evidence of the existence of forensic accounting can be traced back to the year 1817 when the accountant who examined the bankrupt's account was required to testify in the court case (Crumbly, 2001).

Some sources traced the practice's origin back as far as 19th century Scotland when a young Scottish accountant issued a circular advertising his expert in arbitration support in 1824. In the late 1800's and 1900's articles began to appear discussing expert witnessing, evidence arbitration and awards.

It has been said that the phrase 'forensic accounting' was first published in an article in 1946 by Maurice E. Peloubet, a partner in a New York accounting firm. He stated that, “during the war both the public and industrial accountant have been and now engaged in the practice of forensic accounting” (Peloubet, 1946).

Aims and Objectives

The aim of the paper is to discuss frauds and omissions as the causes of inaccurate financial statements, control mechanisms and institutions responsible for investigating frauds as well as the role and importance of forensic accounting and a forensic accountant in detecting frauds in financial statements.

Significance of the Study

This study is significant in many contexts. The study identifies many aspects detecting Frauds in Financial Statements.

Research Questions

The paper will discuss frauds and omissions as the causes of inaccurate financial reporting, control mechanism and instructions responsible for investigating frauds and the place and role of forensic accountants in detecting frauds in financial statements.

Research design

This research is based on the secondary data. This research involved studies in detail the news, articles from journals, and online material available on the web. Using the methodology tested in previous studies, this study began with a broad review of the literature.The findings and conclusions are based on the secondary ...