ABSTRACT
Computer-Assisted Audit Tools and Techniques (CAATT) can assess revenues and expense accounts that can be falsified to increase net income to reach incentive targets. Mapping Financial Statement (F/S) fraud schemes to applicable audit tests, testing management assertions and applicable CAATT expressions, as well as internal controls and associated red flags, reveal more than 80 CAATT-based F/S audit tests and 50 recommended internal controls to improve F/S fraud detection and reduce the financial impact of the fraud schemes. The Association of Certified Fraud Examiners’ Fraud Tree breaks occupational fraud down into three categories: corruption, asset misappropriation, and F/S fraud. In the case of F/S fraud, where F/Ss imply accuracy, fact, and integrity, corporate culture is often a contributing factor in the occurrence of fraud, and moving toward a more ethical corporate culture, together with internal anti-fraud controls, is a crucial component of fraud prevention.
