The scope and limitations of external audit in detecting frauds in company’s operations

Abstract

Purpose This study aims to investigate what are the capabilities and limits of external audit in detecting frauds in companies operating in the territory of the Republics: Serbia, Croatia, Macedonia and Bosnia and Herzegovina. Design/methodology/approach In total, 51 certified auditors from Serbia, Croatia, Macedonia and Bosnia and Herzegovina were surveyed to analyze what are the most frequent warning signals of the existence of the frauds auditors encounter during the verification of company’s financial statements. Findings The study indicated that the auditors of the Republic of Serbia more often encountered groundless overstatement of revenues compared with other countries, while regarding manipulative representation of inventories, the largest mean value and median are still among the auditors of the Republic of Serbia. Practical implications Based on the research results, it can be concluded that it is necessary to expand the legal obligation and power of external auditors when, in financial statement auditing, they come to clear findings that indicate fraud. Expansion of external auditors’ powers would reduce their current limitations and expand the domain of action. Originality/value Limitations in external auditors’ work prevent the processing of frauds. However, auditors’ analysis of financial statements and pointing to potential irregularities can be a good manner for the early detection and prevention of frauds in company’s operations.

Risk Management and other Factors Preventing Fraudulent Financial Reporting by State-Owned Enterprises in Indonesia

“…Preventing fraudulent financial reporting will improve the quality of financial reporting (Dimitrijevic, Jovkovic, & Milutinovic, 2020). Early prevention of financial reporting fraud using internal controls can improve quality financial reporting through reliability (Sofyani, Abu Hasan, & Saleh, 2022).…”

Efektivitas Komite dan Mekanisme Tata Kelola Perusahaan terhadap Pencegahan Kejahatan Keuangan

“…Kejahatan keuangan memiliki dampak yang negatif bagi perusahaan dari berbagai aspek, mulai dari keuangan, reputasi, psikologi dan sosial. Kejahatan keuangan menyebabkan munculnya ketidakpercayaan pengguna informasi yang diungkapkan perusahaan (Dimitrijevic et al, 2020).…”

Using Beneish M-Score and Altman Z-Score models to detect financial fraud and company failure

“…Finansijski izveštaji sadrže informacije koje predstavljaju bazu za odlučivanje mnogih korisnika istih [20, p. 222], te bi stoga bilo posebno važno da fi nansijski izveštaji budu istiniti i objektivni, kao i da prezentuju realnu sliku fi nansijskog položaja i zarade preduzeć a. U tom kontekstu se ističe da je od velikog značaja ocena ostvarivosti budućih rezultata jer od njih zavisi fi nansijski kapacitet preduzeća [21, p. 71]. U praksi to nije uvek tako, jer zbog različitih manipulativnih radnji dolazi do narušavanja kvaliteta fi nansijskih izveštaja [22]. Finansijski izveštaji kompanija predstavljaju veoma dragocen izvor informacija za investitore, a ujedno predstavljaju i osnovu njihovih odluka, te stoga revizori imaju značajnu ulogu u obezbeđivanju razumnog uverenja o validnosti ovih informacija [23].…”