{"id":20328,"date":"2024-06-14T16:15:35","date_gmt":"2024-06-14T16:15:35","guid":{"rendered":"https:\/\/old.finsmartaccounting.com\/usa\/?p=20328"},"modified":"2024-07-11T10:25:20","modified_gmt":"2024-07-11T10:25:20","slug":"the-role-of-audit-in-protecting-businesses-from-fraud-and-financial-misconduct","status":"publish","type":"post","link":"https:\/\/old.finsmartaccounting.com\/usa\/the-role-of-audit-in-protecting-businesses-from-fraud-and-financial-misconduct\/","title":{"rendered":"The Role of Audit in Protecting Businesses from Fraud and Financial Misconduct"},"content":{"rendered":"

Fraud and financial misconduct is an issue that needs to addressed at all levels. But here is the problem. By the time, firm leaders or any other stakeholders become aware of the fraud, it is too late. Sometimes, the leaders themselves are involved. The accounting regulatory standards have loopholes and fraudsters do spot them. Let us take the cases of two accounting fraud scandals.\u00a0<\/span><\/p>\n

Case 1: Treaty of Utrecht<\/b><\/p>\n

This is, undoubtedly, one of the earliest accounting fraud scandals that goes back to the 18th century. In 1720, the UK signed the Treaty of Utrecht with Spain. This would allow them to trade in the South American seas. In reality, hardly any trade happened as Spain renounced the treaty. But this was hidden from the UK stock market. A parliamentary inquiry found that the fraud was between government members. This includes Tory Chancellor of the Exchequer John Aislabie, who was sent to prison.\u00a0<\/span><\/p>\n

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Case 2: Auditing failures in KPMG<\/b><\/p>\n

In 2018, KPMG was fined a whopping <\/span>3 million euros<\/span><\/a> by the Financial Reporting Council. This happened after they admitted to misconduct in its high street fashion chain, Ted Baker audits from 2013 to 2014.\u00a0<\/span><\/p>\n

These are just two of the many accounting scandals. Fraudsters often think they can get away with it. No matter the monetary value, they can get away with it and often do. That is where an auditor plays an important role. In the accounting world, an auditor acts as the security who keeps businesses away from financial misconduct.\u00a0<\/span><\/p>\n

The role of auditors in fraud prevention:<\/b><\/h2>\n

The auditors play an important and independent role in scrutinizing financial records<\/a>. It allows them to ensure their accuracy and reliability. It is important for auditors, globally, to adhere to the recognized regulatory standards. They need to understand and acknowledge that their role expands beyond maintaining compliance. Here are some important functions they need to perform as gatekeepers of accounting fraud:<\/span><\/p>\n