MYTHS BEHIND AUDITING FAILURE

Auditing and accounting is losing public confidence which is vital in the industry of credibility rendering that auditing is into. This lose of confidence by the users of accounting information is as a result of the myths that auditors have been fed with in the past. Some of those myths are listed in this article and auditors are advised to ignore all what they have been fed with in the past and face the issue of financial statement fraud squarely.

MYTHS OF FRAUD

  • Most people are honest and will not steal: who told you that most people are honest? The fact that you may be honest does not mean that every other person out there is honest. For you to be successful in detecting and preventing fraud, you need to develop forensic mindset. A forensic mindset will make you suspect people while still working calmly with them.
  • The owners cannot steal from themselves: this is a wrong concept; owners of business are in fact the class of people that perpetrate the highest fraud. This they do mostly by falsifying financial statements just to create the kind of picture they want to create in the mind of the general public.
  • Fraud only occurs in large companies: fraud can occur in any size of business. Fraud has nothing to do with the size of the business.
  • Most fraud is immaterial: this is one concept in accounting that many fraudsters have been leveraging on to commit fraud. Auditors should see every penny that cannot be accounted for as a gateway to billions that cannot be accounted for. Most celebrated fraud cases were discovered through the investigation and probing of small misappropriation.
  • Most fraud is never detected: in as much as this is arguable, having this as a solace for the failure of auditing in fraud detection is a loser’s approach to life. Auditors should be optimistic that every fraud should and can be detected.
  • Auditors cannot do a better job at discovering fraud: this is one big lie that perpetrators of fraud use to brain wash auditors to give up in the fight against fraud. They often say that the aspect of the legislation that demand auditors to finish their work within certain time frame makes it impossible for auditors to come out with meaningful work. Some even say that auditors are not spirits that can discover fraud committed when they are not there. These are all lies fashioned by fraudsters.
  • Fraud is always well concealed: fraud can never always be well concealed.
  • My client understands that I will not always find fraud: many auditors still believe in old concept of auditing. Thinking that your clients understand that you cannot always find fraud is just like a medical doctor saying that his/ her client understands that prescriptions don’t always work. If so, why then seeking medical attention in the first place?

Any auditor that wants to meet up with the challenge facing auditing and accounting as a whole should wake up from slumber and wipe away those myths about fraud from his or her eyes. Auditing and accounting must regain her lost glory if all auditors should demystify the myths behind fraud and auditing.

To a continued fight against fraud!

One thought on “MYTHS BEHIND AUDITING FAILURE”

  1. Very good points noted. Fraud can be found just about anywhere. If you really look deeply and have the time to find it or allowed to find it than there is a high possibililty that you will find it. But the end result of the audit is not to disclose fraud – that is not the purpose of the attestation function. If you want to change the purpose of the audit than than our audit procedures need to be changed. But changing our duties will change our purpose and our title (we would no longer be auditors but investigators). If this is what our profession needs to become than a complete restructuring of our procedures, programs, education and purpose will need to be structured and this will take many years to be accomplished. There has to be a better solution. My idea is to leave the audit functin as it stands (with minor changes) and create a new government or public entity to take care or battle the fraudsters (separeately) and independent from the audit-attestation services.

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