Question

1.Why does the forensic accountant need a collaborative management to do a good fraud risk assessment?

2. Your author indicates that the sponsor of the fraud risk assessment needs to be a "truth-seeker." What is a truth-seeker? Is a "truth-seeker quality" more about the position or the traits of the individual? Explain.

Answer 1

.1) Why does the forensic accountant need a collaborative management to do a good fraud risk assessment

Good Fraud Risk Assessment always important for any organization mainly due to protect Stakeholders. Effective Control system protect stakeholders efficient way from Fraud. A Structured fraud risk assessment , Organization complexity , should be assessed periodically . Assessment should be in line with Organizational Overall risk. Normally it includes risk identification , risk likelihood ( most important terms under Risk and Fraud environment )

An effective fraud risk identification process includes opportunities , chances to commit fraud etc. Fraud risk assessment identify Control which all override by Management , also specific area where Controls are very weak and chances of frauds will be high .

Fraud as well as Control weakness not only limited to Monetary matter. It will cover companies Financial , Operating performance also ,

An Organization always follow a structural approach and design a proper Internal control system

Understand fraud risks . Monitor management’s report on fraud risk , policies , procedure , control activities .

Established control system from Top to bottom in Organization . Oversee Internal control system established by Higher Management.

Ensure all level of staff , including Management should understand of fraud and aware about the red flag .Every one should understand their role and responsibility

Every employee should be aware with all policies ( fraud , Corporate Governance , Whistle blower )

Internal Auditing should provide assurance to Board and Higher Management about fraud control system are sufficient to identify fraud risk

In general way , a fraud risk assessment includes following major three factor :

1. Identify Inherent fraud risk – Collecting all relevant information . Established different fraud scheme scenario and identify possible fraud matter
2. Identify most likelihood and Significant of Inherent fraud risk
3. Residual risk and fraud risk response

2) Truth Seeker Quality vs Fraud risk Assessment : As per ISA ( International Standard of Auditing “ defined Fraud as any intentional act made by One or More Individual , Management , employees to obtain an illegal advantage . Under Fraud risk assessment , we need to seek for Truth in different level of transactions . Normally Fraud and corruption are often used together in different report (Financial, Operational etc)

Higher Management , Board of director should established proper Frau risk assessment system to protect misrepresentation in Financial and see for actual truth

To established and seek for actual fact /truth /correctness of report , Management needs to Implement sound risk management cycle , like :

1. Established risk management group . set goals
2. Identify risk area
3. Develop risk response strategy
4. Continuous monitoring system
5. Impact analysis of Fraud risk on Financial and other aspect
6. Fraud risk review system and identify that the errors or any events / incident could be the result of a deliberate act
7. Risk include false accounting statement, embezzlement of cash or third party theft
8. Be truthful , accurate in communication
1. We need to understand Business risk , complete transaction , Management issue , employee issue , Process related issue , Financial risk , IT and data risk
10. With help of document evidence ,Fraud risk team does compete Investigation , arrange meeting , Interviews Electronic evidence ( may be complete Audit trail )