Short Answers
Short Answers
The companies all over the world are using the IT to enhance the efficiency of their business. Due to this dependency, the numbers of IT frauds are increasing. The access of the restricted records and the database of the business to the irrelevant employee create a risk for the business. For example, an unauthorized user or employee can increase the pay scale of the individuals in the system of the business. Another important reason of IT frauds is that the proper supervision or the authorization measures are not taken by the organization. For example, the purchasing department is making purchases without the authorization of the warehouse manager and the production manager. In this case, the purchasing department can make extra purchases or expensive purchases. The loss of raw material can be measured by using the ‘live test data’ and ‘dead test data’ techniques. For example, the production department is wasting raw materials to keep the budgets at the easier levels. Therefore, by using the ‘test data’ techniques, the management can access the accurate amount of raw material wastage.
The main responsibility of the internal audit department is to examine the operation and the financial transaction of the business in detail. For example, the internal control department continuously tests the transactions of the business and matches their findings with the actual budgets and the business plans to reduce the chances of frauds. Another example is that the internal audit department is that they identify the conflicts between the tactics of directors and the ethical issues and laws. The investigation of the suspicious activities is another main responsibility of the internal audit department. For example, the transactions or the business activities which are related to the bonus of the directors must be investigated properly to reduce the chances of the frauds. Moreover, the executive directors are busy with financial activities; therefore, it is the duty of the internal audit department to test the internal controls of the business at regular basis to reduce the chances of frauds.
The internal control department reports to the audit committee of the business and it is very important for the internal auditors perform their duties according to the auditing standards. The internal auditors must collect the evidence, either minor or major, and presents it to the audit committee. The senior manager analyzes the issue and the relevant evidence and then gives the opinion. In case of suspicious transactions, the internal auditor must increase the sample size of the transactions to access the frauds.
The evidence from the observation is more reliable than inquiring because in the process of observation, the employees and manager perform their duties according to their normal routine. In case of inquiring, the employee or manager can provide wrong statements. The evidence from the third party is the strongest evidence, because the verification of the outside sources has no influence of the company. For example, to verify the sales, the auditor can request the purchasing company to send the invoices via email of mail. The evidence obtained from the internal auditing team is more reliable because they are more familiar with the risky areas of the business as compared to the outsiders and the external auditors. The external auditors can perform control test on the recommendations of the internal auditor at the planning stage to reduce their work. Moreover, the independence of the internal audit department is the key element in relaying on the findings of the internal audit department.
