Audit Procedures for Estimating the Fraud Risk Based on Indexes for Detection of Accounting Manipulation

Author:Ioan-Bogdan ROBU, Ph. D. Student; Mihaela-Alina ROBU, Ph. D. Student

JEL:C13, C38, C58, M41, M42

DOI:

Keywords:audit engagement, audit procedures, Beneish indexes, fraud risk, discriminant analysis

Abstract:
In an audit of financial statements auditor`s primary objective is to express an opinion on the accuracy of the information reported, in all material respects, in relation to an applicable accounting framework. Although international auditing standards establish that the auditor is not required to detect financial fraud in a company audited, he must be ensured throughout its mission that the fraud risk will not significantly affect the audit opinion. For detecting fraud risk and reporting accounting manipulations, the auditor may use a number of signal indicators. Practice and the literature support the use of indexes to detect accounting manipulation, indexes proposed by Beneish (1999). In Romania, the problems of fraud risk assessment in the audit engagement remains insufficiently treated, until this moment. The purpose of this study is to analyze and assess the fraud risk, triggered by accounting manipulations, using the indexes proposed by Beneish. The study was conducted on a sample of 64 companies listed on the Bucharest Stock Exchange (BSE) in 2010-2012. Data were collected using DataStream, and in their analysis SPSS 20.0 statistical software was used. The research results indicate the possibility of Romanian companies listed at BSE to be classified in different fraud risk groups based on the estimated score function and determined classification intervals. \r\n\r\n

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