{"id":3331,"date":"2014-03-17T06:53:45","date_gmt":"2014-03-17T06:53:45","guid":{"rendered":"http:\/\/indiaforensic.com\/certifications\/?p=3331"},"modified":"2014-03-17T06:53:45","modified_gmt":"2014-03-17T06:53:45","slug":"audit-inefficiencies-to-be-observed-by-the-forensic-auditors","status":"publish","type":"post","link":"https:\/\/indiaforensic.com\/certifications\/audit-inefficiencies-to-be-observed-by-the-forensic-auditors\/","title":{"rendered":"Audit inefficiencies to be observed by the forensic auditors"},"content":{"rendered":"<p>March end is close and many of the firms would be preparing for the finalisation of the accounts. Auditors are likely to visit their places and another profit making year would be awaiting investors. But some times the financial statements are cooked and the auditors are dragged into investigations. This article provides top five audit inefficiencies which results in to the forensic audits by the banks, financial institutions or the regulators.<!--more--><\/p>\n<p><strong>Failure to Gather Sufficient Competent Audit Evidence<\/strong><\/p>\n<ul>\n<li>In-spite of knowing the fact that the inventory balances donot match with the physical inventory, auditors rely on the management representations and donot collect the documentation for the deviations.<\/li>\n<li>The audit firm fails to support underlying estimates that were used to create provisions in the financial statements and failed to obtain additional evidence about estimates used when concerns were noted about potential bias while providing the expenses.<\/li>\n<li>The audit firm fails to substantiate prices used in valuation of the software which is developed internally for the in-house use.<\/li>\n<li>The audit firm fails to perform additional procedures when balance confirmations from debtors contains ambiguous information. Instead, the audit firm relied on management representations.<\/li>\n<\/ul>\n<p><strong>Auditor is not able to provide audit opinion<\/strong><\/p>\n<ul>\n<li>The auditor issued an unqualified opinion even though the audit firm had knowledge that the accounting for an acquisition was not complete.<\/li>\n<li>The auditor fails to modify the audit report even though there are material scope restrictions whereby the auditor fails to corroborate written representations by management and the auditor knows that a material portion of the debtors did not have any supporting documentation.<\/li>\n<\/ul>\n<p><strong>Inadequate consideration of fraud risk<\/strong><\/p>\n<ul>\n<li>The only action taken by the auditor is to assess the risk of fraud is to ask the CFO and accounting staff of the client company, whether they had any knowledge of fraud.<\/li>\n<li>The auditor fails to appropriately respond to notable fraud risks, including failure to adjust audit procedures when the auditor learns that a significant sales transactions have occurred in the last days of the fiscal year.<\/li>\n<li>Procedures to assess the risk of material misstatement due to fraud were documented in the working papers few days after the audit opinion is issued.<\/li>\n<\/ul>\n<p><strong>Inappropriate documentation<\/strong><\/p>\n<ul>\n<li>After completion of the audit and subsequent to the occurrence of the incidence like IT raid on client or announcement of SEBI investigations, firm staff adds additional work-papers to their audit documentation to mask audit inefficiencies.<\/li>\n<li>Audit documentation fails to identify what audit procedures were performed and what conclusions were reached, and the documentation fails to show that accounting records reconciled with the financial statements.<\/li>\n<\/ul>\n<p><strong>Inadequate supervision by audit partner<\/strong><\/p>\n<ul>\n<li>Workpapers prepared by senior staff, including planning areas and high risk accounts, are not reviewed.<\/li>\n<li>The audit partner fails to supervise the article students performing the audit having no audit experience.<\/li>\n<\/ul>\n<p>These are the common audit inefficiencies seen in the audits of various businesses across the sectors and the same may lead to damage to the reputation of the audit firms. Forensic Auditors definitely identify these audit inefficiencies to make their reports stronger.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>March end is close and many of the firms would be preparing for the finalisation of the accounts. Auditors are likely to visit their places and another profit making year would be awaiting investors. But some times the financial statements are cooked and the auditors are dragged into investigations. This article provides top five audit [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3332,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-3331","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-fraud"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Audit inefficiencies to be observed by the forensic auditors<\/title>\n<meta name=\"description\" content=\"Top five Audit inefficiencies observed in the businesses in asian counrties leading to forensic audits\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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