Fraud Audit Pertemuan VI Matakuliah: F0184/Audit atas Kecurangan Tahun: 2007

Bina Nusantara Mahasiswa diharapkan mampu mengidentifikasi audit atas kecurangan, dan audit keuangan Mahasiswa dapat mengetahui fungsi dari auditor kecurangan Mahasiswa diharapkan mengetahui perbedaan antara auditor kecurangan dan auditor keuangan Learning Outcomes 3

Bina Nusantara Fraud audit and financial audit Fraud Auditor Profile Fraud Auditor Vs Financial Auditor Outline Materi 4

Principles of Fraud Auditing Fraud auditing is unlike financial auditing. It is more a mind-set than a methodology. Fraud auditors focus on exceptions, oddities, accounting irregularities, and patterns of conduct, not on errors and omissions. Learning to be a fraud auditor means learning to think like a thief. From an audit perspective, fraud is intentionally misrepresenting financial facts of a material nature. From a fraud audit perspective, fraud is an intentional misrepresentation of financial facts. Bina Nusantara 5

Principles of Fraud Auditing (Con’t) Fraud are committed for economic, egocentric, ideological, and psychotic reason. Of the four, the economic motive is the most common. Fraud tends to encompass a theory structured around motive, opportunity, and benefit. Fraud in a computerized accounting environment can be committed at any stage of processing-input, throughput, or output. Input frauds are the most common. The most common fraudulent schemes by lower-level employees involve disbursements. The most common fraudulent schemes by higher-level managers involve “profit smoothing”. Bina Nusantara 6

Principles of Fraud Auditing (Con’t) Accounting-type frauds are caused more often by absence of controls than by loose controls. Fraud incidents are not growing exponentially, but fraud losses are. Accounting frauds are discovered more often by accident than by financial audit purposes or design. Over 90% of financial frauds are discovered by accident. Fraud prevention is a matter of adequate controls and a work environment that places a high value on personal honesty and fair dealing. Bina Nusantara 7

Common Mistakes From Fraud Auditor Converting audit to investigation Not properly coordinating with other departments Understanding the legal issue to make the case Maintaining appropriate confidentiality Understanding management’s interest in the fraud Bina Nusantara 8

Common Mistakes From Fraud Auditor (Con’t) Obtaining the evidence that is later found to be inadmissible How to put findings and observations into writing Not proving the defendant innocent Understanding what an audit procedure can & can’t detect Lack of Investigation Plan Bina Nusantara 9

Carl Jung Taxonomy Left Hemisphere………… Right Hemisphere Sensation/ Thinking Financial Auditor Intuition/ Thinking Fraud Auditor Sensation/ Feeling Teacher Intuition/ Feeling Artist 10 Bina Nusantara

The Iceberg Theory of Fraud waterline Structural consideration Behavioral consideration Overt Aspect Hierarchy Financial Resources Goal of organization Skill and abilities of personnel Technological State Performance standards Efficiency Measurement Covert Aspect Attitude Felling Values Norm Interaction Supportiveness Satisfaction 11 Bina Nusantara

Competency Needed for Fraud Auditor Legal Organizational Audit Investigative Risk Management 12 Bina Nusantara

Legal Criminal, civil and contractual fraud Fraud versus Theft and embezzlement Material versus immaterial misrepresentation Error versus irregularities Mistakes versus misstatement Conspiracies versus individually perpetrated fraud 13 Bina Nusantara

Organizational Fraud committed or against the company Insider and outsider fraud Insiders in conspiracies with outsiders High level and low level employee fraud Long-term and short-term performance criteria Fraud in high-trust and low-trust organization 14 Bina Nusantara

Audit Internal and external auditor responsibilities Statement and transaction fraud Overstated and understated records On-book and off-book fraud Financial and fraud auditing Concealment, destruction, and alteration of records Fraud in manual versus computerized accounting systems Bina Nusantara 15

Investigative Compromising control and personnel Motivation on fraud Detection and prevention of fraud Psycho-social characteristic Bina Nusantara 16

Risk Management Risk prevention, transfer and assumption High risk companies, industries, occupations, personalities Red flags Bina Nusantara 17