Attributes of Internal Audit and Prevention, Detection and Assessment of Fraud in Pakistan

Abstract

With it being considered as avalue-added activity,theInternal Auditfunction (IAF)of a firm is one of the most important functionsin anorganization. During the last decade,the roleof this particular functionhas become very useful,especially in creating awareness regarding the Prevention, Detection and Assessment (PD&A) of fraudulent activities. In many countries, carrying out an Internal Audit isa legal compulsion for public companies, in orderto establish an effective,and efficient IAF.This study aims to explore the relationship between the various attributes of IAF(effectiveness, independence, staff training, qualification and experience),and the PD&A of fraudulent activitiesin Pakistan. For this purpose, the convenientsampling technique,for data collection,is used and the questionnaires are collected fromtherespondents belonging to Pakistan. The questionnaire has been prepared in the form of a Likert scale. Respondents for this study include (1) staff members working in the Internal Audit (IA),finance and accounting departments of the companies listed on the Pakistan Stock Exchange(PSX), and(2) staff members of firms that are engaged in external statutory audit in Pakistan. Descriptive statistics show the details regarding the demographic questions, IAFand PD&A ofthefraudulent activitiesthat take place in the companies. Moreover, in order to get to the effective and relevant results, the regression analysis is performed in order to find out if there exists any relationship between these variables. The results show that all five independent variables positively affect the PD&A of fraudulent activities. However, three of the independent variables (IAE, IAT, and IAQ) are statistically significant,whereas twoof thevariables taken into account (IAI, and IAE) are statistically insignificant. It is recommended thattheIAFshould be more independent,and effectiveso asto attainthe required results. Moreover, firms should also focus on the qualificationsand proper training of the staff that are responsible forexecutingthe IAF.

Auditors' perspectives on financial fraud in Pakistan – audacity and the need for legitimacy

“…(2020) argue that forensic audit procedures should be subject to statutory mandating, with specialisation in the area a priority for the nation's business schools. This conclusion is consistent with Khan et al. 's (2020) argument, based on quantitative analysis of nearly 300 questionnaires sent to members of firms listed on the Pakistan Stock Exchange, that the internal audit function in the nation would benefit from greater independence and a more “rigorous” (p. 49) hiring process.…”

Determinants of the effectiveness of audit procedures in revealing fraud

“…The experience of an investigative auditor will provide him with a better ability to conduct a careful, thorough, and broad-minded investigation, especially related to revealing fraud activities. Yuniarti & Tiara (2015) and Khan et al (2020) proved that the better the experience of an investigative auditor, the more effective his audit process, especially about disclosure and evidence of fraud. Based on provided information and research, the following hypothesis is proposed: H5: The investigative auditor experience has a positive effect on the effectiveness of audit procedures in revealing fraud.…”