Why Finance Audit Are Important?

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Fraud Detection and Deterrence

It goes without saying that as a criminal deception aimed to gain financial benefit, fraud may be regarded as a considerable risk in accounting that should be detected and mitigated. As a matter of fact, fraudulent activities include cyberattacks, money laundering, forged bank checks, fraudulent banking claims, identity theft, and other illegal practices. As a result, in order to prevent fraud’s negative consequences across diverse platforms, organizations implement modern risk management strategies and technologies for fraud detection and prevention. Thus, in general, fraud detection may be defined as a particular set of actions designed for the identification and blocking of suspicious activities to prevent fraudsters from obtaining property or money in an illegal way.

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Fraud detection is immeasurably important for all organizations that deal with multiple financial transactions, including banks, credit card companies, e-commerce companies, and electronic payment platforms. In addition, it is prevalent across insurance, government, law enforcement, medical, and public sectors. Finally, internal fraud may be observed within a company in a form of occupational fraud when someone uses the organization’s resources for personal enrichment. Nevertheless, the efforts of fraudsters outside or within an organization should never be underestimated. That is why combating fraud and the development of deterrence strategies should be made collectively by the audit committee, the board of directors, risk management personnel, operations personnel, external and internal auditors, and investigators (“Prevention & deterrence,” n.d.). Thus, for an auditor, it is essential to understand evaluate the potential risk of fraud among his professional responsibilities. A competent auditor may recognize the type of fraud and its common schemes, apply data-related analysis techniques, assess risk efficiently, avoid malpractice, and implement a mechanism to prevent fraud in the future. That is why audit is essential in relation to all kinds of fraud as it contributes to the organization’s safety, growth, and development.

Internal Control: COSO

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is an initiative of a private sector established by five financial associations. They include the Institute of Management Accountants, the Institute of Internal Auditors, American Institute of Certified Public Accountants, Financial Executives Institute, and American Accounting Association (“COSO control framework,” n.d.). The main goal of the committee is the improvement of financial reporting quality through ethical practices, corporate governance, and internal control. COSO defines internal control as a specific process impacted by an organization’s, management board of directors, and other personnel that aims to provide assurance in relation to corporate goals’ achievement.

COSO’s internal control has several categories, including financial reporting reliability, the efficiency of operations, and compliance with applicable regulations and laws. In addition, internal control consists of components, such as risk assessment, information and communication, control environment, monitoring, and control activities (“COSO control framework,” n.d.). In cooperation, these components establish the solid foundation for the company’s internal control through accountability for control, shared values, and directed leadership. In relation to audit, COSO’s framework for internal control allows evaluating the performance of the audit committee within an organization.

In general, according to internal control regulations, the committee should have a well-defined and adequate scope of responsibilities for internal auditing and appropriate organizational relationship with senior executives. In addition, the committee’s activities in relation to auditing should be supported by top management and the board of directors (“COSO control framework,” n.d.). Moreover, internal auditing should have private access to senior officers and use open communication lines to prepare reports that cover the right subjects in a time-sensitive manner (“COSO control framework,” n.d.). In general, it is possible to conclude that COSO’s internal control is essential for the provision of regulations for appropriate audit.

Certifications: CFE, CIA, and CISA

CFE, CIA, and CISA are certifications necessary for an accounting professional who want to prove his or her competency in this field. Getting certified demonstrates a strong commitment to the profession and work ethics, helps meet the requirements of accounting, and may guarantee long-term career success. Thus, obtaining the Certified Fraud Examiner (CFE) certification issued by the Association of Certified Fraud Examiners indicates that an accounting professional may be regarded as an anti-fraud professional as well who is able to detect and mitigate fraud efficiently. This certification makes an individual highly valuable in almost any company, especially when a rise in cyberattacks is observed. In turn, CFEs who may uncover fraud efficiently and in a time-sensitive manner contributes to the organization’s successful performance.

The Certified Internal Auditor (CIA) certification is the only internal audit certification that may be defined as globally recognized. It is optional for the communication of competencies, knowledge and skills for effective performance as an internal auditor in any company across the globe. This certification helps an accounting professional be distinguished from other specialists. It enhances respect and credibility, sharpens proficiencies and skills, increases earning potential, and demonstrates an individual’s commitment and understanding of work responsibilities.

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Finally, the Certified Information Systems Auditor (CISA) certification is an ISACA world-renowned standard of achievement for accounting professionals who control, audit, and assess companies’ business and information technology systems (“CISA,” n.d.). It may be regarded as the foundation for a successful IT career as it demonstrates an individual’s expertise and asserts his or her ability to apply the most appropriate approach to planning, executing, monitoring, and reporting on audit engagements (“CISA,” n.d.). This certification helps a person gain credibility in an organization interacting with internal stakeholders, external auditors, regulators, and customers.

References

CISA. (n.d.). ISACA. 2021, Web.

COSO control framework [Power Point presentation] (n.d.). The Institute of Internal Auditors.

Prevention & deterrence. (n.d.). Association of Certified Fraud Examiners (ACFE). Web.

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BusinessEssay. 2022. "Why Finance Audit Are Important?" September 22, 2022. https://business-essay.com/why-finance-audit-are-important/.

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