Detecting Causes of Variances in Operational Outputs of Manufacturing Organizations: A Forensic Accounting Investigation Approach
17 Pages Posted: 16 Jun 2008
Date Written: June 1, 2008
Abstract
With the introduction of the International Standard on Auditing number 240 (ISA240) there has been a paradigm shift in auditing as auditors are now required to identify and assess the risks of material misstatements due to fraud at the financial statement level and to evaluate the sufficiency, implementation and the effectiveness of the controls related to those assessed prone to fraud. This, of course, implies that statutory audit must now take the garb of forensic investigations. The problem with the present system of forensic investigation is that it is focused more on financial transactions than on the totality of the entity's operations and often time neglects areas where there have been constant leakages of other organizational resources that are of financial consequences but which are not easily detected with a normal analysis of the financial statement. This paper attempts to offer suggestions using real case problem on how to apply forensic accounting in investigating variances and suspected fraudulent activities in manufacturing processes. It employs both empirical and supervised experimental modules integrated with the normal audit tools in unearthing fraudulent acts perpetrated over many accounting periods.
Keywords: Audit, Forensic Accounting, Investigations, Financial Statements, Internal Control, Fraud, Procedure
JEL Classification: M41, M47, M49
Suggested Citation: Suggested Citation