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Fraud Detection Questionnaire for Conducting Audit

That an auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing, and has been one of the most frequently debated areas amongst auditors, politicians, media, regulators and the public. So following are some questionnaire regarding fraud detection for conducting audit.


Client    :

Financial Year :

Prepared By       :               Date :

Reviewed By      :               Date :



Consideration of Fraud and Error:

Where planning and performing audit procedures and evaluating and reporting the results thereof, the auditor should consider the risk of material misstatement in the financial statements resulting from fraud and error.

The presence of a dominant owner-manager is an important factor in the overall control environment, as the need for management authorization can compensate for otherwise weak control procedures and reduce the risk of employee fraud and error. However, this can be a potential weakness since there is the opportunity for management override of controls. The owner-manager's attitude to control issues in general and to the personal exercise of supervisory controls can have a significant influence on the auditor's approach. The auditor's assessment of the effect on such matters is conditioned by knowledge of that particular entity and the integrity of its owner-manager.

  1. Does the owner-manager have a specific identifiable motive (for example, dependence of the owner-manager on the success of the entity) to distort the financial statements, combined with the opportunity to do so?
  2. Does the owner-manager make no distinction between personal and business transactions?
  3. Is the owner-manager's life-style materially inconsistent with the level of his or her remuneration (this includes other sources of income of which the auditor may be aware of by referring the owner-manager's tax return)?
  4. Are there frequent changes of professional advisors?
  5. Has the start date for the audit been repeatedly delayed or there are unexplained demands to complete the audit in an unreasonably short period of time?
  6. Are there unusual transactions around the year end that have a material effect on profit?
  7. Are there unusual related party transactions?
  8. Are the payments of fees or commissions to agents and consultants appear to be excessive?
  9. Are there any disputes with tax authorities?
  10. Are parts of the detailed accounting records unavailable or have been lost for implausible reasons?
  11. Is there a significant level of cash transactions without adequate documentation?
  12. Are there many transactions without adequate documentation?
  13. Are there numerous unexplained aspects of audit evidence (such as differences between the accounting records and third-party confirmations, or unexpected results of analytical procedures)?
  14. Is there inappropriate use of accounting estimates?
  15. Have the owner-manager or key personnel not taken annual leave for a long period of time?
  16. Is there lack of sufficient working capital?
  17. Do weaknesses reported earlier still continue?
  18. Is there non-maintenance of year ending inventory and stock registers?
  19. Whether periodical reconciliation statements prepared for branch / head office accounts / reimbursement account / site accounts .
  20. Whether statutory dues / employees dues are pending for more than 3 months.

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