Question

Describe the various fraud detection methods used by auditors and forensic accountants to uncover fraudulent activity.

Answer 1

Fraud can be defined as misrepresentation of facts with intent to mislead someone to believe such facts as true; or misappropriation of money or valuable thing. The investigation of fraud mainly involves forensic auditing of documents and accounts, bank statements examination and various records and statements etc filed by the company with different government agencies.

Forensic accounting evaluations usually use the techniques of interview mainly designed to obtain an admission of guilt by the person(s) involved with the fraud scheme. It is significant that the process of interview be coordinated with an attorney from the auditing organization. The auditors should work within the interview process rules however there are areas that they must try to control to ensure that the interview process work. The final notes of the interview may end up in court.

Data mining is another important technique used in forensic accounting investigations. Under this process where the auditor looks for patterns, trends, and anomalies in a data set. In case any unusual transactions appear in a data set it should be investigated.

Document Review Strategies are an important part of the evidence for an audit. The forensic audit must obtain certain agreements between the parties to properly handle the documents to ensure that these can be used in court proceedings.